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E/5144

ST/ECA/159

WORLD ECONOMIC SURVEY, 1971

Current Economic Developments

UNITED NATIONS

Department of Economic and Social Affairs

WORLD ECONOMIC SURVEY, 1971

Current Economic Developments

UNITED NATIONS

New York, 1912

E/5144ST/ECA/159

NOTESymbols of United Nations documents are composed of capital letters combined with

figures. Mention of such a symbol indicates a reference to a United Nations document.

E/5144ST/ECA/159

UNITED NATIONS PUBLICATION

Sales No.: E,72.11:,C,.2

Price: $V.8. 3.00

(or equivalent in other currencies)

FOREWORD

This report is the twenty~third in a series of Surveys published yearlyby the United Nations, in response to General Assembly resolution 118 (II)requesting the Secretary-General to prepare an annual review and analysis ofworld economic conditions and trends, The present report examines some salientfeatures of current economic developments, taking into consideration the moredetailed biennial reports on the world economy that are to be issued in connexionwith the review and appraisal of the Second United Nations Development Decade, inresponse to General Assembly resolution 2626 (XXV),

In order to facilitate discussion of a number of major internationaleconomic issues, the main body of the present report has been kept cGmpact andpolicy~oriented. Some detailed infor~ation and analyses of the world economy byregions and countries are annexed.

The World Economic Survey, 1971 was prepared in the Centre for DevelopmentPlanning, Projections and Policies of the Department of Econ_mic and SocialAffairs and is based on information available in March 1972.

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CONTENTS

FOREWORD 0 0 0 0 0

EXPLANATORY NOTES

INTRODUCTION 0 0 0

THE INTERNATIONAL MONETARY CRISIS

TRANSITIONAL ARRANGEMENTS

TOWARDS A NEW INTERNATIONAL ECONOMIC ORDER

CONCURRENT DOMESTIC POLICIES 0 0 0 0

Annex

A0 AN OVERVIE'VT 0 • 0 0 0 • 0 • • •

Eo THE DEVELOPED MftBKET ECONOMIES

C. THE CENTRALLY PLANNED ECONOMIES

D. THE DEVELOPING COUNTRIES

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Page

iii

vii

1

0 3

4

6

11

14

31

50

74

World industrial growth, by country group, 1961~1971

World industrial production: changes by country group andbranch, 1961~1971 . " .. . . . . . . . .

World production of major commodities, 1961-1971

World agricultural production, by country group, 1961-1971

Exports of market economies, by country group, 1961-1971

Imports of market economies, by country group, 1961-1971

Export price indices of primary commodities and non-ferrousbase metals, 1969-1971 .

Table

A.l.

A.2.

A.3.

A.4.A.5.

A.6.

A.7.

A.8.

World production:1961-1971 ...

List of tables

annual growth rates, by country group,20

21

22

25

26

27

28

29

B.l.

B.2.

Developed market economies: growth of gross domesticproduct in constant market prices, 1961-1972

Selected developed market economies: changes in majorcomponents of gross domestic product in constantprices, 1961-1971 . . . . . .

38

39

B.3. Developed market economies:prices, 1961-1971 ....

rate of increase in consumer41

B.4.

B.6.

B.7.

B.8.

Selected developed market economies: rate of increase inhourly earnings in manufacturing, 1968-1971 .

Selected developed market economies: unemployment ratesand changes in unemployment, 1969~1971 .....

United States: balance of trade, by country group,1965~1966 and 1970-1971 . . . . . . . . . . . . . . . . . . . .

United States: balance of trade, by commodity group,1965-1966 and 1970-1971 . . . . . . . . . . . . . .

United States: balance of payments, selected items,1970-1971 .

42

43

44

46

Selected developed market economies:1970~1971 . . . . . . . . . . . . .

international reserves,

B.I0. Developed market economies:1970-1971 . . . . . . .

over-all balance of payments,48

C.l. Eastern Europe and USSR: growth of national income,actual and-- planned, 1961-1975 . . . . . . . . 51

C.2. Selected countries of eastern Europe and USSR:of agricultural output, 1970~1971 .

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growth52

C.3.

c.6.

C.7.

List of tables (continued)

Eastern Europe and USSR: growth of industrial output,actual and planned, 1961-1975 . . . . . .

Eastern Europe and USSR: growth of foreign tradevalues, 1966-1975 .

Eastern Europe and USSR: growth of national income,actual and planned, 1961-1975 . . . . . . . . . . .

Eastern Europe and USSR: growth of industrial output,actual and planned, 1961-1975 . .

Eastern Europe and USSR: growth of gross value ofagricultural output, 1961-1975 .

53

57

64

65

66

c.8.

C.9.

Selected countries of eastern Europe and USSR:productivity changes in industry~ 1966-1975 .

Selected countries of eastern Europe and USSR:in gross fixed investment, 1966-1975 ....

labour

changes

67

68

C.10.

C.11.

C.12.

Selected countries of eastern Europe and USSR: growthof real incomes, retail trade turnover and totalconsumption, 1966-1975 ...•...........

Selected countries of eastern Europe and USSR: growthof foreign trade value, by country group, 1961-1975 .

Selected countries of eastern Europe and USSR: apparentincome elasticities of exports and imports, 1961-1975 .

69

70

72

C.13. China: statistical indicators of economic development,1960-1971 . . . . . . . .. .

Developing countries: growth of total production, 1961-1971

Developing countries: changes in terms of trade, 1969-1971

Selected developing countries: changes in consumerprices, 1961-1971 . . . . . . . . .. . ...

D.l.

D.2.

D.3.

D.4.

D.5.

D.6.

D.7.

Selected developing countries:domestic product, 1971

Selected developing countries:production, 1961-1971 ....



indicated changes in gross

growth of agricultural

changes in food

changes in per capita food

73

83

84

86

88

90

92

93

D.8.

D.9.

Developing countries: balance of trade and changes ininternational liquidity, 1969-1971 .

Selected developing countries: changes in internationalliquidity, 1961-1971 . . . . . . . . . ....

96

98D.10. Major oil-producing developing countries:

and government oil revenue, 1971 .

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oil production101

EXPLANATORY NOTES

The following symbols have been used in the tables throughout the report,

Three dots ( ... ) indicate that data are not available or are not separatelyreported

A dash (-) indicates that the amount is nil or negligible

A blank in a table indicates that the item is not applicable

A minus sign (-) indicates a deficit or decrease, except as indicated

A full stop (.) is used to indicate decimals

A comma (~) is used to distinguish thousands and millions

A slash (/) indicates a crop year or financial year, e.g., 1960/61

Use of a hyphen (-) between dates representing years, e,g., 1961-1963,signifies the full period involved, including the beginning and end years

Reference to "tons lr indicates metric tons, and to frdollars H ($) UnitedStates dollars, unless otherwise stated

The term ffbillion ff signifies a thousand million

Annual rates of growth or change, unless otherwise stated, refer to annualcompound rates

Details and percentages in tables do not necessarily add to totals, becauseof rounding

The following abbreviations have been used:

CMEA

EEC

EFTA

GATT

IMF

SDR

Council for Mutual Economic Assistance

European Economic Community

European Free Trade Area

General Agreement on Tariffs and Trade

International Monetary Fund

special drawing rights

The designations employed and the presentation of the material in thispublication do not imply the expression of any opinion whatsoever on the part ofthe Secretariat of the United Nations concerning the legal status of any countryor territory or of its authorities, or concerning the delimitation of itsfrontiers.

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INTRODUCTION

In terms of production and trade, the performance of the world economy in 1971was unspectacular. The rate of growth of aggregate production of goods andservices remained at about 4 per cent in 1971, not much more than that of theprevious year. Although this rate fell short of the First United NationsDevelopment Decade's annual average of 5.3 per cent, a world~wide recession, whichat times was considered to be a possibility, was averted.

The developed market economies, which weigh heavily on the global figures,displayed a high degree of resilience. The combined rate of growth of 3.4 per centwas significantly below the potential. At the same time, the continued slackeningin the industrial sector was not accompanied by declining rates in other maineconomic activities. In a number of countries, a combination of unemployment,inflation and external imbalance posed new challenges calling for appropriatepolicy mixes. Their resilience amid disquiet reflected these economies' latentstrengths, which had been kept under restraint but which could be released andre-energized when the risk of rekindling inflation appeared to be smaller thanthat of allowing recession to deepen. A variety of means, including monetary andfiscal measures and prices and incomes policies - a whole range of instruments,conventional and unconventional, built~"in and discretionary ~ was used to bringabout the desired effects.

Nor were the recessionary developments in some countries so powerful as toseriously affect the developing countries. In part this was due to differences inthe phasing of economic activities in the developed market economies, so thatstagnating conditions in some of these countries were offset, to a greater orsmaller degree, by heightened activity in others. It also reflected a tendencytowards greater self~reliance in the management of their national resources andless dependence on external determinants among the developing countries themselves.At a 5.4 per cent rate of growth in 1971, these countries maintained another yearof relatively high growth in comparison with the developed countries and withtheir own performance in the First Development Decade. This augurs well for thelong process of narrowing the gap between the developed and the developingcountries, although an accelerated growth is required if the target of the SecondDevelopment Decade is to be attained. The achievement was the more noteworthyin that agricultural growth in the developing countries slackened, despite, insome cases, further progress in the green revolution. At the same time, the groupaverage was affected by substantial improvements in a relatively few countries,including a number of large countries which exaggerated the average performance ofmany developing countries, including some of the least developed. Furthermore, inmost of these countries, the longer~term process of fundamental structural andsocial transformation has yet to gather momentum.

The centrally planned economies, largely unaffected by the vicissitudes ofthe rest of the world, recorded another year of growth in 1971. The 6.4 per centaggregate rate of growth of national income in eastern Europe and the USSRcorresponded closely to the average planned rate. Although this rate was belowboth that of the previous year and the annual average rate of 6.7 per cent of

the 1960s, there was in fact an acceleration in most countries of the ~roup. Themain exception was the USSR, where the bumper crops enjoyed in 1970 were notrepeated, while eastern Europe experienced a gain in agricultural production.

The economic expansion in the USSR and eastern Europe was accompanied by ashift in priorities towards consumption, in line with most of the five~year plans.There was an increase in the share of consumption in the national income, a greateremphasis on investment in consumer goods industries and a redeployment of labourin favour of services.

The performance of the centrally planned economies of Asia was marked by acontinuation of the high rates of growth achieved in China in recent years.Aggregate industrial and agricultural production increased about 10 per cent in1971, as in the previous year. This sustained vigour was accompanied by massparticipation on all fronts.

Compared with developments in world production, the rate of growth of worldtrade continued to be relatively high, although the exceptional buoyancy ofearlier years was not maintained in 1971. The increase in volume in 1971 sloweddown to about 6 per cent, well below the average of the 1960s. In terms ofdollar value, despite a slackening in 1971 from the immediate past, the 11 per centrate was in line with the average of the 1960s.

The relatively fast growth of the dollar value of world trade reflectedsubstantial increases in export prices. The price index of manufactured goods ininternational trade increased 6 per cent, while the rise in prices of primarycommodities averaged 5 per cent. The weakness in prices of a number of agriculturalcommodities and base metals exerted a moderating influence on the rise. In contrast,petroleum and petroleum products recorded a dramatic increase, largely a reflectionof the improved bargaining position of the producers. The terms of trade ofindividual developing countries thus varied greatly, depending on the main exportsinVOlved, although there was no substantial change for these countries as a whole.

Developments in the world economy in the first quarter of 1972 kindled hopesfor somewhat improved performance. The resumed expansion and simultaneousimprovement in internal and external balance of the developed market economies asa whole was especially noticeable.

The main event of 1971, however, was not simply a matter of aggregateproduction and trade. Nor is the challenge for 1972 so confined. The internationalmonetary crisis of 1971 signalled the transition from an old era to a new one. Themeasures unilaterally adopted by the United States of America in August ended thegold~exchange standard of the post-war years at a single stroke as the dollarceased to be convertible and rates of exchange were no longer fixed. While therealignment of currencies in December 1971 restored some measure of order for theexchange markets, a new international monetary system has yet to be constructed.

With the passing of the old international monetary system, the basis for asteady expansion of world trade must also be rebuilt. The choice is not simplybetween mercantilist restrictions and a greater liberalization of trade relations,but one between more or less self-contained trade blocs and a truly interdependentworld, and among different modalities of reconciling internal and internationalobjectives. Indeed, seldom have so many fundamental issues demanded a simultaneoussolution.

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THE INTERNATIONAL MONETARY CRISIS

In retrospect, the workings of the international monetary system afterBretton Woods served the needs of an expanding world economy very well. Therelative stability of the exchange rates of major currencies facilitatedinternational commerce. The continuing deficit in the United States balance ofpayments provided the rest of the world with increasing liquidity. Despite theslow growth of monetary gold, world liquidity outside the United States, notincluding special drawing rights, trebled between 1950 and 1970. Although theincrease was especially conspicuous in a few industrial countries, it was generaland widespread. This liberal supply of liquidity formed the basis for aomesticexpansion in most parts of the world and for a steady liberalization of exchangecontrols and trade, which in turn facilitated growth.

The fundamental difficulties of the system had been widely recognized beforethe crisis of 1971. In fact, the very success of the system revealed its basicweaknesses since the increase in world liquidity was made possible by a steadydecline in the liquidity of the United States and, with it, the key currency ofthe entire system.

As long as the relative shift was interpreted as a transient phenomenon ofpost-war recovery in western Europe and Japan, it was greeted with satisfactionby all parties concerned. The momentum of the relative shift proved, however,surprisingly enduring. As early as the beginning of the 1960s, signs of thevulnerability of the dollar began to appear even while fears of a post-war dollarshortage lingered on.

A foretaste of massive attacks on a reserve currency was provided by therepeated sterling crises of the early 1960s. Here it was evident that the basisof sterling as a reserve currency, inherited from the United Kingdomis pastpre-eminence in world trade and finance, had changed fundamentally when the sizeof its empire was greatly reduced and its overseas investments mostly liquidated.~lliile the relative decline of sterling meant the rise of the dollar as theundisputed reserve currency, an attack on sterling frequently also meant anattack on the dollar.

Responses to the strains and stresses of the system and to periodic attackson the dollar had been largely palliative in nature. The upsurge in the price ofgold, reflecting doubts about the contention that the dollar was as good as gold,was dealt with first by the major central banks, which pooled their operations,and subsequently by a two-tier system which severed the gold market from officialmonetary transactions. As the United States i gold stock fell far below itsofficial liquid liability and United States' deficits continued, the collapse ofthe system was only postponed by great restraint on the part of the major centralbanks which refrained from massive conversion of their large dollar holdings intogold.

Periodic disquiet in the exchange markets was allayed by such devices asswap agreements, special bond issues to mop us excess official liquidity andforward exchange operations. Nevertheless, the inability of the central banks tomaintain the fixed exchange rate of the dollar finally triggered the crisis of 1971.It began with a massive movement of short~term capital from the United States in1970 after the reversal of an extremely stringent monetary policy in 1969. As the

European countr.ies and Japan continued their restrictive policies at the beginningof 1971, interest differentials between these countries and the United Stateswidened. A total of $12.5 billion left the United States during the first twoquarters of 1971, as the effect of the interest differential was magnified by thesharp deterioration in the United States trade balance. Eventually, in May, thepressure on some European currencies became so heavy and the dollar accumulationso large that the Federal Republic of Germany and the Netherlands decided to float,and Austria and Switzerland to appreciate their currencies. These measures andofficial interventions in the exchange markets by the central banks of westernEurope and Japan proved unable to stop the flight from the dollar. On one or twodays in August, the outflow reached as high as $1 billion.

On 15 August 1971, the United states suspended the convertibility of thedollar into gold or currencies. Other emergency measures included a 10 per centtemporary surcharge on dutiable imports. Since the surcharge fell most heavilyon manufactures and exempted many raw materials and products, it affected about60 per cent of the developed market economies 1 exports to the United states andabout a third of those from the developing countries.

These dramatic measures had important repercussions on the rest of the world.The countries of the European Economic Community (EEC) were for a time unable toadopt a common policy in response to the new situation. The floating of somecurrencies posed a threat to the Communityi s internal cohesion. In France, theimposition of capital controls and a two-tier exchange system reversed the trendtowards liberalization of the European capital markets. In Japan, the initialreluctance to revalue the yen was overcome only when the Bank of Japan, in thecourse of a single month, accumulated over $4 billion, more than its entireinternational reserve of a year before. The developing countries whose reserveswere mostly in dollars suffered a heavy loss, although their debt burden, alsomainly expressed in dollars, Was correspondingly reduced in terms of othercurrencies. Exporters of commodities largely destined for the United Statesmarket, such as coffee, wool and tin, were faced with a possible decline in thepurchasing power of the proceeds in terms of other currencies. The applicationof the surcharge to the developing countries was considered unwarranted since thepayments deficit of the United States was on the whole unrelated to traderelations with these countries. ~1oreover, the surcharge was counter to thecommitment to introduce a general preferential scheme favouring imports fromdeveloping countries.

TRANSITIONAL ARRANGEMENTS

The currency realignment negotiated among the major trading nations at theSmithsonian Institute in December 1971brought the immediate crisis to an end. Thecurrencies of the world were in better balance after differential adjustments hadbeen made in terms of gold or special drawing rights (SDR). The dollardepreciated by about 12 per cent in terms of the major currencies of the developedmarket economies, and about 7 per cent in terms of a composite of all othercurrencies (weighted by the pattern of United States trade), while the Japaneseyen and German mark headed the list o·f currencies which appreciated. The wideningof the margin to 2 1/4 per cent on either side of the central rate, permitted bya majority of countries, has provided greater flexibility in the exchange market.

The agreement is clearly a transitional arrangement to be followed by a moredurable one. Even in the short run, the arrangement presupposes that countrieswith strong currencies will be prepared to bear the main responsibility ofmaintaining the value of the dollar, though at a wider margin of 2 1/4 per centfrom the central rate. Unless the payments deficit of the United States isreversed, this can only be achieved by absorbing more dollars or by restricting ordiscouraging the flow of dollars into surplus countries. In the first few monthsof 1972, it was apparent that countries such as Japan had had to resort to bothmethods.

When the aggregate dollar outflow is continued, outright restriction ofdollar inflow by some surplus countries tends to deflect the direction of the flowto other countries. This could trigger a cumulative process which would furthererode confidence in the dollar and circumscribe its usability. On the other hand,certain short~term capital flows, occasioned by borrowing from United Statescommercial banks by enterprises in countries already burdened with dollar surpluses,or the shifting of deposits to these countries merely to take advantage of interestdifferentials, could be restrained by incentive measures with the aid of marketforces. Such measures as requirements to deposit a portion of the proceeds offoreign borrowing with the central bank or suspension of interest payments onforeign deposits by the surplus countries and contrary measures by the UnitedStates, would make an important contribution to the improvement of the paymentsbalance.

A reare fundamental improvement in the situation would have to be effectedthrough the trade balance, which was the intent behind the currency realignment.The effect of exchange depreciation on the trade balance, however, is expected tolag behind a year or more. There is, moreover, considerable uncertainty as tothe degree of responsiveness of trade to changes in relative exchange values andprices. Where foreign costs are substantially lower, product differentiation issignificant, and a taste for foreign produce has been developed, marginal changesin prices may fail to bring about the desired effect. Furthermore, the exchangerate effect may be offset, to a greater or lesser extent, by the relative buoyancyof the United States economy and home demand as compared with the situation in itsmajor trading partners. There have, so far, been few signs of materialimprovement in the United States payments position substantial enough to stave offa renewal of disturbances on the international monetary scene.

On the other hand, the outflow of short-term capital can change direction verysuddenly under the influence of changing interest differentials and speculativemotives. As the United States economy becomes more buoyant, and Europe and Japanmove towards monetary ease in the course of 1972, the interest differential,taking into account forward exchange premium or discount, may become morefavourable to a reflow of short-term capital to the United States. Moreover, aslong as the dollar rate is close to the lower limit. there is a considerableexchange risk in speculation against the dollar when fUrther currency realignmentis not imminent. As long as the widened margin makes the risk of holding anycurrency fairly sUbstantial, and as long as forward cover is costly, there is anincentive to adjust the currency portfolio in order to minimize exchange risks.This consideration tends to work against the dollar when the dollar is dominantin the portfolio, but becomes favourable to the dollar when the holding isreduced below prospective trade and payments requirements.

There is, therefore, a great degree of potential volatility in the currencymarkets that may work in either direction. This uncertainty will not be removedunless the longer-term issues are settled. These issues go far beyond paymentsequilibrium; the whole international monetary system and regime of world trade areat stake.

TOWARDS A NEW INTERNATIONAL ECONOMIC ORDER

Despite the proliferation of national, regional and international institutionsconcerned with various aspects of the international monetary and trade issues, theprecise wa3TS and means by which these issues are to be examined, the differencesin approach reconciled and the various aspects integrated, are yet to be worked out.

Inasmuch as the issues are of vital concern to all nations, it is imperativethat each nation should examine its substance and streamline its own institutionswith a view to evolving a national policy. In view of the complexity of theissues and the diffusion of responsibility among many ministries and financialinstitutions, a great degree of co-ordination will be necessary. This is essentialfor serious international negotiations, especially if the negotiations are mainlyconducted by representative groups of countries and the positions of individualcountries are to be articulated indirectly through an intermediary. At thesame time, the positions of countries should not be so solidified as to hampergive and take.

At the regional level, where a degree of intra-regional co-operation hasalready been attained through common tariffs or monetary unions, Governments willhave to reconsider regional arrangements in light of the future internationalmonetary and trade regimes. The question arises, for example, of the degree towhich the European Economic Community may be enlarged and its precise relationshipwith countries on the other side of the Atlantic, or in Oceania, and withdeveloping countries now linked to it by various economic ties. Moreover, anexplicit common position in respect to the nature of the future internationalregimes will have to be formulated.

vlliile many urgent issues pertain especially to the pivotal countries, suchas the United States, the members of the European Economic CommUl1ity and Japan,so that a reconciliation of their views is central to the shaping of a newinternational economic order, the issues are too important to the world communityas a whole to be left to a few countries. In contrast to the transitionalarrangement, which was made almost exclusively by the Group of 10, a much broaderrepresentation of countries and interests is essential for a long~term solution.

It is true that many issues are extremely technical and complex, so thatconcrete solutions will be difficult to arrive at if the discussions are carriedout within the framework of a general debate by a large number of participants.Careful preparation by specialized international institutions dealing withmonetary or trade matters and consideration by relatively small groups areessential before large-scale negotiations can be fruitful. Yet there is no realsubstitute for an international endeavour that will encompass all nations.

There is, of course, no shortage of ideas and even of plans from variousquarters. Nevertheless, on a number of central issues a consensus has yet tobe developed, before being embodied and spelt out in operational plans andinstitutions for the future.

Monetary issues

On the central issue of the future international currency unit~ few by nowwould return to the gold standard or the gold exchange standard. World liquidityis too important to be determined by the accident of gold supply or by thebehaviour of one or two national currencies. Yet the precise role of gold in thefuture international monetary system remains to be settled. At the same time,even if it is assumed that the dollar will no longer be the centre-piece in theinternational reserve system, some arrangement will have to be made with regardto the $50 billion or more at present held by Governments outside the UnitedStates.

Both the gold and the reserve currency issues are closely related to thecreation of a new international reserve unit. The 1969 decision of theInternational Monetary Fund (IMF) to establish special drawing rights and thesubsequent creation of close to SDR 9.4 billion (equivalent to the same amountof pre-realignment United states dollars) have already established the principlethat international reserves can be deliberately created by an internationalinstitution. The experience already gained has demonstrated the acceptabilityand practicability of this principle, at least within limits. On the other hand,there are important differences between the creation of money within a nationand internationally. Apart from the fact that international decision-makingnecessarily involves many sovereign nations, anyone of which may withholdapproval of a particular arrangement, the most obvious difference is that in theinternational case the degree of confidence in, and the authority of~ theinternational monetary institution depends on the willingness of nations todelegate authority to it~ and this in turn depends on the degree to which theyhave effective control over it.

A less obvious difference between national money creation and the creation ofinternational money such as SDR, is that the central bank of a nation does notgive newly created money to its citizens, whereas SDR are allocated to individualcountries. While a formula for allocation, based on such criteria as existingquotas in IMF can be negotiated, other arrangements can be envisaged. The demandby the developing countries to be treated more favourably than they have beenunder the present system of IMF quotas, or for the provision of a link between thecreation of reserve assets and development finance, is a case in point. Thequestion of allocation will inevitably become more important as the creation of aninternational reserve is conceived of as a fiduciary issue which can be owned asa reserve rather than as a form of credit which debits the holder with an equivalentliability. The matter will come to the fore as the relationship between thefuture reserve asset and gold is weakened and the issuing authority of theinternational monetary institution is strengthened.

A balance has to be struck between the creation of a truly strong internationalmonetary authority and the diffusion of power over its control among many nations.In fact, a number of countries, notably the centrally planned economies, havebeen reluctant to join even the present International Monetary Fund mainly becausethey have been unwilling to accept all the obligations of membership. One way ofreconciling this basic conflict is to plan a series of phases during which aprogressive process of integration takes place quite rapidly within groups ofcountries that are fairly homogeneous and more gradually among these groups, toform eventually a global superstructure.

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1iJhile the manner in which adjustment is to take place is implicit in anyinternational monetary system, there is general appreciation of the need for somedegree of exchange rate flexibility and for stronger international supervision ofsurplus as well as deficit countries. A basic reason for the reluctance to alterexchange rates would be removed if the international reserve unit became lessdependent on a single national currency. Yet opinions are still divided as towhether the flexibility should be achieved through wider exchange margins in afixed-rate regime, through permission for temporary departures from fixed rates,or through constant minor "crawling" adjustments which resemble floating. Thecentral consideration here is the degree to which countries are prepared toharmonize their domestic policies and to delegate some authority to internationalorganizations 0 This is illustrated by the general acceptance of a fixed-rateor narrow~margin solution by members of a common market within which a degree ofpolicy harmonization can be achieved.

Without a deliberate harmonization of policies, the expected adjustmentprocess between surplus and deficit countries may fail to take place. The existingmechanism of international adjustment is directed almost exclusively to thedeficit countries. The asymmetry in the treatment of deficit and surpluscountries is a natural carry-over from the creditor-debtor relationship. There maybe an additional justification for this asymmetry in the reluctance of Governmentsto pursue deflationary policies in a world aiming at full employment. It isconceivable, however, that the major source of disequilibrium may stem from thepolicies of surplus countries rather than those of the deficit countries. Thispossibility is all the more likely since a payments surplus may serve as aconvenient'stimulus to domestic expansion as well as a useful means of overseasinvestment and extension of economic power.

Trade issues

Thus, the international monetary issues are closely linked with the tradeissues. Indeed, international reserves may be viewed primarily as instrumentsfor the financing of potential trade deficits. Exchange rate and domesticeconomic activity adjustments may be viewed as a means of changing trade balances.Yet, where there are trade restrictions the effect of these adjustments on the flowof trade can be partly or wholly nullified.

There is a real danger that progress on the international monetary front willnot be matched by commensurate progress on the trade front. There is indeedapprehension that the post-war advances in trade liberalization, culminating inthe Kennedy Round of tariff reductions just completed, may come to a halt or evenbe turned back. In the post-war period, the cause of freer trade has beenchampioned by the United states. Recent developments and the crisis of 1971,however, have led to a reappraisal of basic premises and to an upsurge ofprotectionist sentiment in certain important segments of that country's population.It is argued that the United States' persistent payments deficit has resulted notonly from a steady shift of economic power away from the United States but alsofrom numerous deviations from the principle of free trade by its main tradingpartners. The restrictions widely practised on agricultural trade are cited inthis connexion. Devices such as quotas and border taxes can effectively blocktrade regardless of comparative advantages. In manufactures, the relativeopenness of the United States market and its freedom from hidden restrictionshave contributed to a concentration of many foreign items in that market. Thus,

the dramatic expansion of Japanese exports has been highly concentrated in theUnited States market: while almost a third of Japan's exports in recent years hasbeen absorbed by the United states, less than one tenth has gained entry into theEuropean Economic Community. Despite official reassurances that the tradeliberalization policy will continue, there is increasing pressure in the UnitedStates administration to extend quotas and voluntary restrictions to a largenumber of sensitive items.

Even in the field of tariffs which operate within the market framework, theprinciple of most-favoured-nation (MFN) treatment, which is the corner~stone ofthe General Agreement on Tariffs and Trade (GATT), has been seriously eroded byregional groupings. With the impending enlargement of the European EconomicCommunity from the Six to the 10, it is expected that a major portion of worldtrade in manufactures will in fact take place under preferential arrangements.The extension of the Community's special arrangements to the rest of the EuropeanFree Trade Area (EFTA) and associated countries and territories in many parts ofthe world will further erode the MFN principle.

From the point of view of the developing countries, the recent adoption ofthe principle of general preference in their favour is a significant achievement.The international community has accepted the proposition that equity is notnecessarily achieved by equal treatment for unequals. By the same token, thedecline in the relative economic position of a pre~eminent power as a result ofimprovements in the position of the rest should in the final analysis form abasis for true equality and competition rather than for restraint of competition.A movement tnwards freer trade among the main developed nations may indeed makemore sense now that competition among equals has virtually become a reality. Theelimination of tariffs will automatically render preferential tariff arrangementsineffective. vlliile trade relations among the developed countries will thereby beimproved, the benefits of the preference in favour of developing countries willevaporate unless new schemes are introduced to compensate for the loss.

In the face of shrinking tariffs, it is the pervasive non-tariff restrictionsthat are becoming increasingly serious - for the developing as well as thedeveloped countries. These restrictions raise a host of domestic policy problems,including agricultural production and price policies, and health and environmentalcodes. Most of them are likely to increase in importance on account of growingpublic concern for the well~being of particular social groups and apprehensionabout the hazards of rapid economic and technological development, even if theyare not primarily intended to restrain trade. The international scrutiny, andin some cases orderly elimination, of non-tariff restrictions must be high on theagenda of future trade negotiations.

The importance of domestic policies to trade relations as well asinternational monetary relations is especially evident with respect to the centrallyplanned economies. By definition, the trade of these economies is planned andthus not necessarily determined by market forces. Freer trade between centrallyplanned and market economies thus involves more than the simple elimination oftariffs. Indeed, even within the framework of GATT, special arrangements such asassured rates of increase in imports into these countries have sometimes been madeto allow for this complication. The explicit recognition by the market economiesof the crucial importance to trade negotiations of at least some aspects ofdomestic policy should facilitate arrangements with the centrally planned economies.

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At the same time, the greater interest in international relations and inmultilateral approaches displayed recently by some of the centrally plannedeconomies should also facilitate an increase in their role in world trade. Theachievement of closer trade and other economic relations between countries withdifferent economic systems would help to give concrete expression to the recenttrend towards a political detente and pave the way towards a more coherent world.

Capital movements

The rules governing capital movements are closely related to internationalmonetary and trade matters, and they too must be reconsidered. The unsettlingeffects of massive movements of short~term capital during the monetary criseshave caused great concern. To the extent that these movements are interestsensitive, a greater degree of co-ordination of interest policies among nationsseems indicated. The problem is complicated by conflicts between internal andexternal considerations. Thus, when inflationary pressure coexists with apayments surplus in one country and unemployment vnth a deficit in another, thereis a natural reluctance for the former to lower interest rates and for the latterto raise them in order to induce an equilibrating capital movement. Aninternational code of conduct and mechanism for surveillance may be needed ifdisequilibrating measures and unilateral restrictions are to be avoided.

Such a code of conduct and supervisory machinery are no less necessary inrespect of long-term capital movements. They are in any case desirable in order toreconcile national interests in the face of fears of foreign domination on the onehand and of arbitrary expropriation on the other. They are also necessary as apart of any payments arrangement. Irrespective of the question whether a privatecapital outflow will ultimately benefit the pa~®ents situation of the capitalexporting country, there is growing concern that when the source of capital isa deficit country the capital-importing country is involuntarily financing aYlforeign takeover!!. The issue is thus related to the future disposition of dollarbalances. Indeed, according to some proposals, the liquidation of a portion of thevast United States investment abroad or, alternatively, investment in United Statesassets by the holders of excess dollars may be a most useful way of funding dollarbalances. These issues are also related to the operations of multinationalcorporations which have played an increasingly important part in both short-termand long-term capital movements. While these corporations are frequently effectiveagents for the transfer of technology as well as capital to developing countries,their role is sometimes viewed with awe since their size and povECr may surpassthe host country's entire economy. The international community has yet to formulatea positive policy and establish effective machinery for dealing with the issuesraised by the activities of these corporations.

The interdependence and complexity of international monetary, trade andfinancial issues place a heavy curden on the international community. 1971's yearof crisis will not have been endured in vain if 1972 becomes a year of intensivepreparation for a new international economic order, so that serious negotiationsmay be started without undue delay, and the way paved for a more prosperous andless turbulent continuation of the Second United Nations Development Decade.

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CONCURRENT DOMESTIC POLICIES

Emphasis on setting the stage for a new international economic order must notbe allowed to overshadow needs on the domestic front. The interrelationshipbetween national and international aspects of the economic nexus has already beenunderlined in connexion with the domestic adjustment processes implicit in aninternational monetary or trade regime. There is a need to bring many domesticissues, such as production and price policies, into the realm of internationalnegotiations.

What should be emphasized here is that an international economic order, nomatter how well~conceived. cannot work if nations fail to manage their own affairseffectively. This will be all the moY@ true if the new international economicorder achieves a degree of openness that impli~p heightened competition amongnations. A weak nation will not only encounter domestic difficulties but mayalso undermine the entire international 8ystem by adopting bcggar-thy~peighbour

policies.

It should not be expected, however, that every nation will be highlycompetitive with the rest of the world in every industry and product, Anintensification of the international division of labour means that even thestrongest economic power may encounter external pressures in particular sectorsand localities.

~llien the necessary adjustments mu~t be made, it is not sufficient merely toassure the population groups adversely affected that their sacrifice representsa net gain for the nation as a whole. Deliberate measures, such as the retrainingand relocation of workers and assistance to depressed industries or regions, suchas those recently adopted by a number of developed countries, constitute animportant counterpart to inte~gtional policy.

An enlightened domestic adjustment pg1i~f in the advanced countries isespecially relevant to the developing countrie§, for it is precisely thoseindustries in which the developing countries ngve a competitive advantage tpatare relatively weak in the developed countries. It is ironic that as soqn as theyachieve some success in these industries, developing countries are faced with newbarriers to their further development. Moreover, the products of these industriesare often excluded from the preferential schemes for the developing countries.A shift of emphasis in tbe developed countries from trade restraint to adjustmentmeasures would improve the @~~Qrt prospects of the developing countries andfacilitate their growth.

Inasmuch as the pressure of internatiqnal competition on the developingcountries is likely to be widespread and severe, domestic adjustment policies inthese countries must be viewed in a broader perspective. The entire developmentstrategy is at issue. While there is no single strategy which will suit everydeveloping country, experience has shown that the particular division of labourimposed on the d@veloping countries by the exchange of primary products formanufactures has held back long-term modernization. On the other hand, morerecent experience has a:L§Q .~hown that neglect of the traditional sectors hasdeprived many nations of th@ip m~in source of employment and of imports for themodern sector. Policies of ra~id in4uptrialization unsupported by a viableagricultural sector have often fail@d dis~ally. It is small wonder that a number

,-:),,1-

of recent development plans have placed new emphasis on the importance ofagricultural and rural development. At the same time, the dynamics of imbalancemay be engendered by failings in the modern sector as well as by weaknesses inthe traditional sector. Without constant improvements in irrigation, in thesupply of fertilizers and other inputs and in infrastructures, there are severelimitations to sustained agricultural development. Without domestic industriesto produce these inputs and enlarge and improve the facilities for producingthem, the capacity for further growth will be seriously limited by the ability toimport, which in turn will be limited by the structure of exports.

Even from the point of view of industrial development, it is not alwaysadvisable to concentrate on simple industries directed towards home consumption.The export potentials are often small, not because of the intrinsic limitationsof natural endowment but because of cumulative policies of commission and omission.Thus, the nurturing of high-cost domestic industries tends to price exports outof the market. Unrestrained home demand often pre-empts export surpluses. Whenvested interests are strongly entrenched, structural transformation becomesincreasingly difficult.

Such trrolsformation is not, of course, always revealed in availablequantitative information. The measurement of development by such macro-economicindicators as gross national product, frequently misses some of the most crucialfactors. A most cogent illustration from recent experience is that in a number ofdeveloping countries a fairly high rate of economic growth has been accompaniedby large-scale unemployment and mass poverty. Yet the precise nunmer andcharacteristics in terms of age, sex, location, skill or duration of the unemployedhas often eluded the policy-makers. Indeed, the apparent gain in aggregate growthmay produce a false sense of security in a latently explosive situation. Thestrategic importance attached to measurable physical capital has tended to pushhuman factors into the background. While economic growth may ultimately bringabout more employment opportunities and a better distribution of income, it has inmany instances accentuated the problem in the short run through shifts ofpopulation and differential rates of sectoral growth. Moreover, importantdevelopments, such as agrarian reform and social restructuring, may not bereflected in the current economic quantities either because their impact takestime to be felt or because the link is not direct.

Thus, the new emphasis on social objectives and the quality of life embodiedin a number of current development programrrles and policies is helpful in gaininga proper perspective. The pursuit of more and more material goods and servicesis envisioned as one of the instruments for promoting human well-being or at leastavoiding the most elementary forms of human misery, rather than as a good in itself.At the same time, a redirection of priorities should not be confused with theunqualified endorsement of alarmist views regarding economic growth. The centralaim for most countries, and rightly so, is growth with quality rather than qualitywith zero growth. Todayi s problem of scarcity and want is too immense to ~e

tackled merely by redistributing and improving existing quantities.

A significant and positive contribution of the current concern for theenvironment and for social objectives has been to focus attention on the factthat the earth is a small planet and that humanity must share a single fate.Yet, preoccupation with domestic problems has led many countries to neglect theirroles in the international framework. For the rich and powerful nations, this isan untenable course, as has been forcefully demonstrated in the forums of theUnited Nations Conference on Trade and Development (UNCTAD), The current

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Etagnant trend for the flow of aid from these countries to the developing world isa matter of particular concern, especially in view of the sizable debt of over$60 billion that the latter has already accumulated.

As far as the less developed countries are concerned, the task of nationbuilding is inevitably the most urgent, especially where internal cohesion cannotbe taken for granted, but it must be more closely related to efforts on theinternational front. The vulnerability of the developing nations to externaleconomic forces is readily recognized. More important and more positively, it hasbeen increasingly recognized that a nation's development programme can be greatlyaided by international arrangements. Apart from broad international monetary andtrade arrangements, the existence of more limited agreements, on regionalco-operation in industries, in transport and in energy, for example, can make agreat deal of difference to the efficiency and viability of these activities foran individual country. In this connexion, the progress made among the developedcountries affords a startling contrast to the tardiness of the developingcountries, despite the interest many of the latter have expressed in regionalco~operation and solidarity. At the same time, because of the intrinsic difficultyof co-operation among the developing countries, through lack of a common heritage,the paucity of existing trade, and the absence of complementarity in theireconomies, not to mention deep~rooted political divisions, a gradual approachtowards practical co~operation has often been more fruitful than have ambitiousgrandiose schemes.

Advocating a practical approach, however, is not to advocate timidity, whetherat the national,regional or global level. In the short run, practical measures forco~operation in the international monetary, trade and financial spheres must startfrom the existing realities. In the longer term, it is the change in the existingrealities that will lay the foundation for further changes to bring about a moreefficient and humane system.

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Annex

A. AN OVERVIEW

Production----_.-

The aggregate rate of increase in world production of goods and services wasabout 4 per cent in 1971, slightly more than the 1970 rate but well below theaverage annual rate of 5.3 per cent in the First United Nations Development Decade.The relatively low rate was chiefly a reflection of conditions in the developedmarket economies whose combined rate of growth was only 3.4 per cent. At the sametime, the centrally planned economies, following a year of high growth in 1970,slowed down to more or less the average rate registered in the 1960s. Thedeveloping countries maintained a rate in excess of the 5 per cent achieved duringthe First Development Decade but below the target rate of 6 per cent.

As in the previous year, the rate of growth in industry continued to slacken.Agricultural production, however, increased at about 4 per cent as against theaverage rate of 2.6 per cent in the First Development Decade.

Industry

In the industrial sector, the slackening was again concentrated in thedeveloped market economies, as the rate in western Europe decelerated from almost6 per cent in 1970 to about 2 per cent in 1971, while North America registered agrowth of less than 1 per cent as against a decline in output in 1970. In thecentralJy planned economies of Europe, the 1971 expansion was also somewhat belowboth the previous year's rate and the average rate of the 1960s. ~he developingcountries, on the other hand, as in 1970, expanded industrial production well abovethe average rate of the past decade.

The global deceleration of industrial growth was shared by most branches, withthe notable exception of textiles and chemicals. The rate of increase in textileproduction actually recovered from the low figure of the previous year (2.2 per cent)to the average rate registered in the First Development Decade (4.3 per cent),despite a slight deceleration in the centrally planned economies.

In contrast, production of food manufactures slowed down from the average rateof growth of the 1960s (5 per cent) to 4 per cent in 1971. The rate decelerated lnthe centrally planned economies, reflecting a lack of growth in the agriculturalproduction of the USSR in 1971 following the record harvest of 1970. In thedeveloping countries the growth of the food industry slowed down moderately fromthe 1970 rate but remained somewhat above the rate of the previous decade.Altogether, the output of consumer goods industries maintained a more or lesssimilar rate of growth in 1970 and 1971, moderately below the 4.6 per cent rateof the 1960s.

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The global rate of growth in heavy industry remained at about 4 per cent in1971, only half the average rate of the past decade. An increase in the rate ofgrowth of the chemical industry was offset by the decline in output of the basicmetals and metal product industries.

The principal source of this stagnation was the performance of the developedmarket economies, where the output of heavy industry expanded only 0.7 per cent asagainst a 1.3 per cent growth in the previous period. The developing countriesaccelerated the rate in 1971 to reach the average rate of 8.6 per cent of theprevious decade.

In North America, the only category of heavy manufacturing that did notexperience an absolute decline was the chemical industry - the branch that hasmaintained the highest rate of growth throughout the post~war period. In 1971,Chemicals recorded a moderate recovery in the rate of expansion in North Americafrom 0.6 per cent in 1970 to 4.7 per cent. In the centrally planned economies anddeveloping countries, the rate of growth of the chemical industry was maintained atthe level of about 12 per cent. This more than offset the deceleration in westernEurope from 8 per cent to 5 per cent in 1971.

The output of the basic metal industry declined in 1971. The decline reflectedthe state of the industry in North America and western Europe. In the centrallyplanned economies, output continued to grow at a rate of 6 per cent in 1971, and therate of growth in the developing regions recovered moderately from a mere 2 per centin 1970.

The global rate of increase in the output of the metal products industry wasagain less than 4 per cent in 1971, half the average of the past decade. In thedeveloped market economies, the output stagnated, while in the centrally plannedeconomies it continued to grow at a rate of about 11 per cent.

Mining production also experienced some deceleration of growth, from 6 per centin 1970 to about 5 per cent in 1971. High growth rates were maintained in thecentrally planned economies (7 per cent) and in the developing countries (9 percent), while the rate of growth in the developed market economies deceleratedfrom 3 per cent in 1970 to 0.8 per cent in 1971. World production of petroleumincreased by 5.4 per cent in 1971 as against 9.8 per cent in 1970 while coalproduction remained at the 1970 level.

~griculture

Preliminary estimates for 1971 suggest that the growth rate of agriculturalproduction accelerated from 2.7 per cent in 1970 to 3.9 per cent in 1971, wellabove the average rate of 2.6 per cent registered during the First DevelopmentDecade. This expansion reflects the combined effects of better weather, increasedacreage in the case of some major crops and greater application of such inputs asfertilizer and improved seeds in most regions of the world. The substantial gainin output in the developed market economies more than offset a sharp decelerationin the centrally planned economies of Europe and a moderate slow-down by thedeveloping countries in their rates of agricultural expansion, a complete reversalof the situation in 1970.

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The 5,7 per cent increase in the developed market economies in 1971 (asagainst 0,1 per cent in 1970) was more than twice the average rate of the pastdecade, reflecting a remarkable recovery in North America, where an almost1 per cent decline in output in 1970 was followed by an almost 10 per cent rise,and in western Europe where the rate rose from 2.1 per cent in 1970 to 5.4 percent in 1971, On the other hand, the growth rate in the centrally planned economiesslowed down substantially from a record rate of increase of 7 per cent in 1970 to amere 1,9 per cent in 1971. This is due to the fact that agricultural production inthe USSR made no further increase from the record 1970 level, which had been10,3 per cent over the 1969 figure. Agricultural production in eastern Europe,however, after setback in 1970, recorded an increase of 6 per cent. The developingcountries as a whole maintained neither the rate of growth achieved in the previousyear nor the average rate of the preceding decade.

The very large increase in output in the United States of America and Canadachiefly reflected the relaxation of constraints on grain acreages and, to someextent, favourable weather conditions. As a result, the two North Americancountries registered a sharp rise in the output of grains and other crops to a newrecord level, In the case of western Europe, the sharp recovery reflected asubstantial growth in grain crops due rather to higher yields than to anysignificant increase in acreage. Generally favourable weather conditions in theentire region made possible a recovery from the low rate of expansion recordedin 1970, With the exception of Greece, Italy, Portugal, Finland and Norway, almostall the countries contributed to the exceptionally high growth, The FederalRepublic of Germany, the Netherlands and Sweden maintained a rate slightly belowthe high growth rate of the previous year.

Among the developing countries, southern and south~eastern Asia and thewestern hemisphere recorded a deceleration in agriCUltural expansion to a below~

trend rate of growth, while output in west Asia recorded a sharp recovery fromthe decline experienced in the previous year, In Africa, the rate of growth inagriculture remained moderately above the rate achieved in 1970, which was slightlyabove the average rate of the past decade. Production in the south and west Asiancountries of Afghanistan, Iran, Iraq and West Pakistan was unfavourably affectedby dry weather, India and Indonesia continued to show above-trend output, Theexpanded use of high-yield varieties, fertilizers and irrigation enabled cerealproduction to reach a record level, In Africa, dry conditions appear to have movednorthward from Nigeria, In the southern part of the continent, generally increasedproduction reflected a return to better weather conditions.

World production of wheat, barley and maize all recorded a recovery in 1911from a below~trend rate of growth (wheat and barley) or an actual decline (maize)to well above the trend~rate, That the rice harvest did not grow as fast as inthe previous several years is largely a reflection of a reduction in Pakistan andalso in Japan, where output is being reduced through a government policy of landdiversion.

World sugar production in 1971 increased marginally over the 1970 level toreach a record output: about 80 million short tons of centrifugally producedsugar and 11 million short tons of other types, usually for local consumption,Western Europe!s production of sugar beet was large due to favourable weatherconditions. Cuban sugar production experienced another decline, and the Sovietcrop remained at the production level of the preceding year. Among major

producers, smaller crops were reported in India, Indonesia, Mexico, Poland and theUnited States, while larger crops were harvested in Argentina, Australia, SouthAfrica, the Philippines, Spain and Turkey.

Horld coffee production recovered sharply in the 1971/72 crop year from the1970/71 setback, and at about 71 million bags (of 60 kilograms each), the largestcrop since 1965/66, the total output remained well above the average for the 1960s.Brazil produced twice the amount ~ecorded in 1970/71, reaching the early 1960 level.After allowance for domestic consumption, exportable production is estimated to beabout 52 million bags, which is below the estimated world import requirements.Latin Americais exportable production in 1971/72 rose to 31 million bags, whichwas above the average of the past decade and more than two thirds of the worldtotal (against less than half in 1970/71).

The cocoa bean harvest, which increased for the third consecutive year, isexpected to reach a record of 1.6 million tons in 1971/72. The gain was largelyin Africa, where production is estimated to have increased by 7 per cent. LatinAmerican production is also expected to be higher because of a record Brazilianharvest. Among African countries, high rates of growth were registered by Ghanaand the Ivory Coast.

1;vorld cotton production, after stagnating for several years, rose by nearly8 per cent to a record crop of 55 million bales (of 480 pounds) in 1971/72. Thetwo major cotton producers, the USSR and the United States, registered less thanaverage expansion. Production in the developing countries was up about13 per cent to nearly 24 million bales (well above the 1965~1969 average of22 million); larger crops were harvested by most of the major producers, includingBrazil, India, Mexico and Pakistan, while there was a modest fall in output inEgypt.

Wool production fell by 0.5 per cent in 1971, registering a third annualdecline from the record output of 1968. High production costs and low worldmarket prices continued to affect world production adversely. Output in Australiaand South Africa remained stationary but New Zealand and the United Kingdomregistered a fractional decline. In the United States output was down by 5 per centwhile in the USSR it rose by 2 per cent.

World tea production in 1971 seems to have repeated the record 1970 harvestof 1.1 million metric tons 0 Despite another record crop in India, Asian tea outputfell slightly as a result of smaller crops in Pakistan. Drought conditions in theearlier part of 1971 in Kenya and Uganda resulted in a small reduction in Africanproducing countries as a group. On the other hand, western hemisphere productionincreased sUbstantially, reflecting a record harvest in Argentina.

Copra and coconut oil, of which southern and south~easternAsia are thelargest producers, fared much better as earners of foreign exchange in 1971 thanin the early years, substantial gains in production more than counterbalancing thedecline in price. This, however, was not the case with natural rubber, anotherof the region 1 s major exports, though production increased at the decade averagerate of 3.5 per cent in 1971. Total jute and kenaf production in the three mainexporting countries (India, Pakistan and Thailand) declined in 1971 due to thesubstantial reduction in Pakistan 9 which more tha,n offset the increase in Indiaand Thailand.

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Trade

There was a marked slow-down in the expansion of trade in 1971, reflectingthe rather sluggish growth of world production. The quantum of trade rose byabout 6 per cent, well below the annual average rate of increase registered duringthe First Development Decade. In terms of dollar value, despite a sharpdeceleration from the preceding year, the 1971 increase in trade (11 per cent) wasmore or less in line with the decade average.

The deceleration in world trade mainly reflected the slower economic growthin western Europe and Japan and the only modest recovery in North America. Theinternational monetary crisis contributed to an atlnosphere of uncertainty, althoughits direct effect on the trade returns for 1971 appears to have been less severethan was at first feared.

The value of the foreign trade turnover of the centrally planned economies ofEurope decelerated, in line with the intentions of the intermediate-term developmentplans. The increase of about 9 per cent in 1971 was lower than that of world tradeas a whole but above the average target rate of 8 per cent in their 1971-1975 plans.The rate of expansion in the value of foreign trade turnover for the Peopl.eisRepublic of China also decelerated from the high rate of 1970 to about 5 per centin 1971.

The rise In export prices of goods moving in international trade deceleratedsomewhat from the exceptionally large increase in 1970, a deceleration in thedeveloped market economies more than offsetting an acceleration in the rise indeveloping countries. Nevertheless, the price index of manufactured goods enteringinternational trade rose by about 6 per cent between 1970 and 1971, onlyfractionally lower than in the previous interval. Among the developed marketeconomies, the rise in export prices decelerated in North America and Japan whilewestern Europe experienced a greater rate of price increase in 1971 than in 1970.Only in the case of the developed economies of the southern hemisphere - whichexported a great deal of wool at lower prices as well as minerals under long-termcontract - did the average unit value decline fractionally.

As the bulk of exports from the developed market economies representedintra-trade, the rapid rise in their export prices had its counterpart in acorresponding rise in their import prices. Europe and Japan, however, since theyimported relatively more food-stuffs and other primary products, experienced asmaller price increase for imports than for exports. Thus, the terms of tradeimproved by more than 3 per cent in the case of EFTA, and 2 per cent in the caseof EEC and Japan, and deteriorated by about 5 per cent in the case of the southernhemisphere countries and by 1 per cent in the case of North America.

Imports of the developed market economies increased in value by about11 per cent in 1971 as against about 15 per cent in the previous year. Overtwo fifths of the 1971 rise was accounted for by price changes, however, comparedwith rather more than a third in 1970. The increase in import quantum was about6 per cent in 1971, well below the average expansion rate of the 1960s. The 1971increase in import quantum was almost 10 per cent, however, in the case of NorthAmerica, which recovered from the virtual stagnation of the previous year. On theother hand, sharp decelerations in import expansion were registered in all theother developed regions; Japan (from about 20 per cent in 1970 to about 2 per cent

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in 1971), the southern hemisphere countries (from about 13 per cent to 3 per cent),EEC (from about 12 per cent to about 6 per cent) and EFTA (from about 9 per cent toabout 3 per cent).

In the developing countries, import prices tended to reflect changing conditionsin the developed market economies which were their main trading partners. Between1970 and 1971, there was a rise of almost 4 per cent on the average; the lowest rate(2.9 per cent) was recorded in southern and south-eastern Asia where intra-tradeplayed a relatively greater part, and the highest rate (over 5 per cent) in thewestern hemisphere where more than two fifths of the import expenditure wasaccounted for by higher prices. For the developing countries as a whole, theincrease in the volffi~e of imports was about 7 per cent, although Africa registereda 13 per cent increase.

Export unit values in the developing countries tended to be affected less byinflationary forces of a general nature and more by conditions and expectations onthe markets for particular commodities. Export prices were substantially higher in1971 than in 1970. The price of primary commodities exported from the developingcountries increased by about 5 per cent in 1971 as against 2.9 per cent in 1970.This was brought about by a remarkable increase in mineral prices and a moderateincrease in the price of agricultural non-food products which more than offset aslight decline in food prices. The price of non-ferrous base metals exported fromthe developing countries experienced a sharp decline in 1971. The most significantincrease was in respect of petroleum (18 per cent) following the agreements betweenthe oil companies and the petroleum-producing countries. As a result, the averageunit value of exports from west Asia increased by 20 per cent and from Africa by7 per cent, while it declined by 5 per cent in the western hemisphere. In southernand south-eastern Asia, export prices increased at the same rate (about 3 per cent)as in 1970. For the developing countries as a group, the increase in the unit valueof exports was 4.4 per cent in 1971 as against 2.8 per cent in 1970. The expansionin export quantum was greatest (about 11 per cent) in the western hemisphere,although export earnings increased less than 5 per cent due to a decline in unitvalue. In Africa, the volume of exports declined, but with higher prices exportearnings rose nearly 5 per cent in 1971. In the case of west Asia, the 3 per centincrease in quantum yielded a substantial rise (almost 24 per cent) in exportearnings due to favourable petroleum prices. In southern and south-eastern Asia,exports increased at about the same rate as in 1970 with respect to both price andquantum.

Though the terms of trade for the developing countries as a group improvedfractionally in 1971, this conceals large regional differences. The terms of tradeimproved substantially for west Asia and Africa, deteriorated markedly for thewestern hemisphere, and for southern and south-eastern Asia remained unchanged.

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Item and country group

Gross domestic produc~/

Table A.1. World production: annual growth rates,by country group, 1961-1971

(Percentage)

Averageannual rate,1961-1970

Change frompreceding year1970 1971 ~/

Sum of country groups • •

Developed market economies c/Centrally planned economies-d/Developing countri3s ~/ -

Industrial productiOu!/

Sum of country groups. • •

Developedma-rket ec{)nomies glCentrally planned economies-Developing countries g/ • ~

- ---'- - j..••

Agricultural productiong! ~/

Sum of country groups

Developed market economies 0/Centrally planned economiesDeveloping countries ~/

5.35.06.75.1

6.7

5.78.37.4

2.62.53.02.6

3·92.68.05.8

4.4.2";0'

8.57.6

2.70.17.03.2

4.23.46.45.4

3.. 8.."":1;3

7.78.2

3·95.71.81.9

Source: Centre for Development Planning, Projections and Policies of the United NationsSecretariat, based on Statistical Office of the United Nations, Monthly Bulletin of statisticsand Yearbook of National Accounts Statistics; Food and Agriculture Organization of the UnitedNations, Monthly Bulletin of Agricultural Economics and Statistics (Rome),. and national sources.

Preliminary.

Measured at constant market prices;the case of 1970 and 1971.

196q in the case of the 1961-1970 average, various

c/ North America, northern, southern and western Europe, Australia, Japan, New Zealandand South Africa.

d/ Eastern Europe and USSR. Data refer to net material product and are not strictlycomparable to those of the other country groups.

e/ Latin America and Caribbean area, Africa (other than South Africa) and Asia (otherthan China, Democratic People's Repuolic of Korea, Democratic Republic of Viet-Nam, Japan andMongolia).

f/ Based on index of value added, except in the centrally planned economies for which theindex-is based on gross output at constant prices; in the case of the German Democratic Repubiicthe index refers to the value of commodity production, and in the case of Hungary to output inphysical units and other indicators.

g/ Israel is included with the developed market economies in the index of industrialproduction.

Q/ Based on index of gross output.

~/ Average annual rate based on regression trend line.

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Table A.2. World industrial growth 5 by country group5 1961-1971

(Percentage)

Country groupAverage annual

rate,1961-1970

Change from preceding year1970 1971 a/

Sum of country groups .

Developed market economies

North America b/Europe c/. -Asia 9:./- .Southern hemisphere ~/

Centrally planned economies of:

Europe

USSREastern Europe £/

Developing countries

Hestern hemisphere g/Asia gj " .

6.7

5.7

5.05.3

13.96.1

8.3

8.57.8

7.46.47.6

4.42.0

-2.85.8

16.05.3

8.5

8.58.4

7.6

6.77.5

3.8

1.3

0.72.15.13.3

7.7

7.87.4

8.2

10.6

Source: Centre for Development Planning 5 Projections and Policies of theUnited Nations Secretariat, based on Statistical Office of the United Nations,Monthly BUlletin of Statistics, and national sources.

Note: For method of calculating indices, see table A.l.

~ Preliminary.

£! Canada and the United States of America.

£/ Excluding eastern Europe.

9J Israel and Japan.

~ Australia, New Zealand and South Africa.

£! Albania, BUlgaria, Czechoslovakia, German Democratic RepUblic, Hungary,Poland and Romania.

g/ Latin America and Caribbean area.

~/ Excluding Israel and Japan.

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Table A.3. World industrial production: changes bycountry group and branch. 1961-1971

(Percentage per annum; 1971 index. correspondingperiod of 1970 = 100)

Light manufacturing~ Heayy manufacturing£!Country group and Mining Total Food Tex- Total Chem- Basic Metal

period tiles icals metals products

Sum of country groups

Average annual rate,1961-1970 . 5.2 4.6 4.9 4.3 7.9 9.4 6.0 8.2

1970 · · · · · 5.9 3.7 6.0 2.2 4.3 5.0 2.7 4.2Index 1971:

First quarter 106 104 107 103 104 106 101 104Second quarter 105 102 103 104 103 107 101 102Third quarter 103 104 103 105 105 107 97 105

Developed marketeconomies

Average annual rate.1961-1970 . 2.7 4.2 4.1 3.8 6.6 9.0 5.2 6.5

1970 · · · · · 3.4 1.5 3.9 -0.8 1.3 4.0 0.7 0.6Index 1971:

First quarter 106 102 106 101 101 103 97 100Second quarter 102 101 102 103 99 105 98 98Third quarter . 99 103 101 104 101 105 91 100Fourth quarter 95 104 104 103 103 107 96 103

North America

Average annual rate.1961-1970 3.4 3.9 3.5 4.3 5.3 8.1 3.6 5.2

1970 · · · · · . 4.1 -0.8 3.3 -5.7 -5.3 0.6 -5.9 -7.8Index 1971:


Western Europe

Average annual rate.1961-1970 1.0 4.0 4.4 2.1 6.1 9.3 4.1 5.6

1970 · · · · 1.9 3.9 6.3 6.1 7.9 2.1 7.2Index 1971:


-22-

Table A.3 (continued)

Light manufacturinga7 H ft· bleavy manu ac urlng-Country group and Mining Total Food Tex- Total Chem- Basic Metal

period tiles icals metals products

European EconomicCommunity

Average annual rate,1961-1970 1.7 3.9 4.3 2.0 6.7 10.0 4.4 6.0

1970 . · · · · 2.7 3.2 5.5 6.7 7.0 2.0 8.7Index 1971:

First quarter . 112 104 106 104 103 105 96 104Second quarter 103 102 101 103 99 104 93 99Third quarter . 102 102 105 104 100 104 97 99Fourth quarter 103 104 105 99 107 99 95

Centrally planned economies

Average annual rate,1961-1970 6.5 5.1 6.0 5.1 10.6 11. 7 7.6 11.6

1970 · · · · 7.0 6.6 6.3 7.2 10.0 6.5 6.5 11.4Index 1971:

First quarter . 108 105 106 105 110 110 107 IIISecond quarter 108 103 104 106 110 III 105 IIIThird quarter . 107 103 103 106 III 113 105 112


Average annual rate,1961-1970 8.5 5.3 5.3 5.0 8.6 7.9 7.2 9.8

1970 . · · · . 9.2 5.6 8.6 6.4 7.8 10.0 1.9 8.3Index 1971:

First quarter • . 108 107 109 106 108 112 99Second quarter 108 107 103 107 109 112 110Third quarter . III 106 107 108 109 III 101

Asia

Average annual rate,1961-1970 · 8.4 5.8 5.6 5.3 9.4 7.4 9.1 11.3

1970 · · · · 10.3 5.4 7.4 9.4 9.2 8.1 -0.7 8.9Index 1971:

First quarter 113 109 112 105 107 114 99 108Second quarter 117 108 103 105 108 113 104 105Third quarter . 118 109 109 107 III 114 108 108

-23-

Country group andperiod

M" •__lnlng


. "al H ft' blLlght manufacturlng- eavy manu ac urlng-Total Food Tex- Total Chem- Basic Metal

tiles icals metals products

We~tern hemisphere

Average annual rate,1961·~1970

1970 . . . . . .Index 1971:

First quarterSecond quarterThird quarter .

4.3 4.8 5.0 4.4 8.4 8.5 7.1 9.12.4 5.0 6.6 3.6 8.1 10.6 3.1 7.3

103 99100 114

98 97

So~: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on Statistical Office of the United Nations,Monthly Bulletin of Stat7.stics.

Note: For method of calculating indices, see table A.l; for definition ofcountry groups, see table A.2.

~ International Standard Industrial Classification (ISIC) 20-26, 28-30, 39.

~I ISIC 27 9 31-38.

Table A.4. World~1 production of'major commodities,£1 1961-1971

Commodity1970

(millionsof' tons)

Averageannual rate,1961-1970

Percentage ~hange f'rompreceding year I

1969 19701971~

Jute and kenaf' •Oil-seeds ~I . .Natural rubber.

Coal dl .. .. .. .. . .. .. .. .. .. .. .Petroleum, crude • • • • • • •Electricity (billions of' kWh)Cement •••••Pig iron • • • • • • •

Aluminium el f'1 ••• • • • • • • •Merchant vessels, ~ (millions <;>f' grt)Passenger cars (millions) •••••Commercial vehicles (millions) •Nitrogenous f'ertilizer •

7.01.50.91.91.8

-1.4}.33.5

5.45.32.61.9

-3.113.1-3.01.13.0

6.812.913.210.78.5

7.18.6

15.61.04.2

1.15.60.8

}.52.88.61.4

-2.1

1.99.87.55.35.6

3.24.8

-3.72.4

-1.1

0.31.4

-1.93.6

-7.2

7.712.2,.;1.3

-11.35.5

-5.75.15.33.4

12·3

14.22.21.30.51.9

31.01.68.8

1.47.68.75.17·9

8.09·27.7

12.4-3·2

13.214.3

4.74.5

l2'Jo

2.54.03.5

1.37.97·96.36.1

5.73.74.63.51.9

8.310.0

5.85.05.5

2.34.11.72.2

-0.5

1.9,2·93.00.71.0

1.51.1

74.211.52.7

8.221.722.46.0

29·2

3161392603-06

4.1

2,0752,2544.~.?~~~

500'4TIr

5735.33.92.60.2

. ... .. .. . . ..

. .. .. .. .. . .. ..

.. .. .. '"

.. .. .. .

'" .. .. .Cocoa beans • •Tea .. .. .. .. • ..Sugar (raw)Cotton (lint) ••••Wool (greasy)

Steel, crude • • • •Copper, smelter e/Zinc Y "Xl· • •-.Lead e/ I/ .....Tin !!..7 ., .. . #I .. .. #I

Wheat • • • • •, Barley •••••

Maize •••••Rice (paddy). •Cof'f'ee • • • • •

Source: Centre f'or Development Planning, Projections and Policies of' the United NationsSecretariat, based on Statistical Of'f'ice of' the United Nations, Monthly Bulletin of' Statistics.

2:./---. Excluding production of' China.L"it In the case of' agricultural cornmodities, the data f'or anY particular crop year ref'er

to the calendar year in which the bulk of' ~he crop was harvested.

~I Preliminary.

dl Including coal equivalent of' brown coal and lignite.

~ Excluding production of' USSR.

!./ Excluding production of' Czechoslovakia, Democratic People's Republic of' Korea,German Democratic Republic and Romania.

~ Tonnage launched outside USSR.

~ Cotton-seed, linseed, ground-nuts in shell, i~apeseed~~~oyabeans, sesame seed,sunf'lower seed and castor beans.

-25-

Table A.5. World agricultural production, bycountry group, 1961-1971

(Percentage)

Average annualCountry group rate of change, Change from preceding year

1961-1970 1970 1971 §:../

Sum of country groups · . . . . . 2.6 2.7 3.9

Developed countries:

North America · 1.5 -0.8 9.7Western Europe 2.4 2.1 5.4Oceania pj. · · 3.1 -0.6Other developed countries £!. 3.6 2.4Eastern Europe 2.5 0.6 6.5USSR . · · · 3.3 10.3

Developing countries:

Western hemisphere 2.6 2.6 0.6Africa . · · · · 2.4 2.8 3.4West Asia · · · · 3.1 -0.6 4.3Southern and south-eastern

Asia . · · · · . . . . 2.6 3.9 1.9

Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on Food and Agriculture Organization of theUnited Nations, Monthly Bulletin of Agricultural Economics and Statistics (Rome);information supplied by the United States Department of Agriculture; andnational sources.

§:/ Preliminary.

£! Australia and New Zealand.

£! Israel, Japan and South Africa.

-26-

Table A.6. Exports of market economies, by country group, 1961-1971

(Percentage)

Value f.o.b. in Unit value inQuantum dollars dollars

Country group Average Change Average Change Average Changeannual from annual from annual fromrate of preceding rate of preceding rate of precedingchange, year change, year change, year

1961-1970 1970 1971 §:./ 1961-1970 1970 1971 a/ 1961-1970 1970 1971 §:.!

Total . . . . . . . . . . . 8.0 9.0 5.9 9.5 14.7 11.0 1.2 5.6 4.9

Developed market economies 8.4 9.2 6.0 10.1 15.5 11. 5 1.5 5.6 5.3

North America 6.5 7.9 0.6 8.6 14.5 3.9 1.9 6.1 3.3

Europe 8.7 8.5 6.9 10.3 15.7 13.2 1.4 5.7 6.3

~ EEC . 10.0 10.5 6.8 11.6 17.2 13.3 1.3 5.7 6.3[\)--..:t EFTA 6.3 5.3 4.2 8.1 12.5 11.6 1.6 6.5 8.8I

Japan . 16.3 14.0 19.7 16.9 20.8 24.6 0.4 5.7 4.8

Southern hemisphere 6.6 9.0 6.1 7.2 7.1 6.7 0.4 -0.3 -0.5

Developing countries 6.5 8.2 5.2 7.2 11. 6 10.0 0.6 2.8 4.4

Western hemisphere 3.7 2.4 10.9 5.5 10.2 4.7 1.7 5.5 -5.0

Africa 7.8 10.1 -2.0 9.1 11. 6 4.8 1.2 0.9 7.0

\Vest Asia 9.5 12.0 3.3 9.3 10.6 23.6 -0.2 20.0

Southern and south-eastern Asia 7.0 9.5 9.0 6.4 12.5 12.1 -0.4 2.9 2.8

Source: Centre for Development Planning, Projections and Policies of the United Nations Secretariat,based on Statistical Office of the United Nations, Monthly Bulletin of Statistics; International MonetaryFund, International Financial Statistics (Washington, D.C.).

~ Preliminary, based in some cases on estimates.

Table A,7, Imports of market economies, by country group, 1961-1971

(Percentage)

Quantum

Country group

Averageannualrate ofchange,

1961-1970

Changefrom

precedingyear

1970 1971 ~

Value c, i. f, indollars

Average Changeannual fromrate of precedingchange, year

1961-1970 1970 1971 ~

Unit value indollars

Average Changeannual fromrate of precedingchange, year

1961-1970 1970 1971 ~

If\)co~

Total """"..

Developed market economies

North America

Europe

EEC •EFTA

Japan. ,

Southern hemisphere


Western hemisphere

Africa

West Asia

Southern and southeastern Asia

8,3

9,1

8,0

9.1

10.56,3

14.7

5.75,64,9

3.36,7

6.5

9,5

9,8

0,5

10,7

11.88,7

19,9

12,5

8.8

10,7

6.1

4.1

8,6

6,3

6.2

9,6

6,5

6.23,4

1.8

3.0

7.0

7.3

13.0

7,0

9,4

10,3

9.7

10.2

11.67,6

15.5

7,0

6,5

6.2

5.38,4

6,7

14.5

15.38.4

16.9

17,116.1

25.716.1

12.4

14.0

16.3

3.4

10.1

11.1

11.2

14,8

10.9

12,19.2

4.1

7.712,0

13.0

18.0

6,1

11.0

1.0

1.1

1.6

1.0

0.91.2

0.6

1.1

1.0

1.3

1.6

1.7

0.2

4.7

5,7

7.2

4.8

4,85,7

4.9

3.53.8

4.67.6

2.8

2.0

4.54.64.8

3.7

4.65.72,2

4.63.9

5.3

3.7

Source: Centre for Development Planning, Projections and Policies of the United Nations Secretariat,based on Statistical Office of the United Nations, Monthly Bulletin of Statistics; International MonetaryFund, International Financial Statistics,

~ Prel~minary, based in some cases on estimates.

Table A.8. Export price indices of primary commoditiesand non-ferrous base metals, 1969-1971

Index (corresponding quarterof previous year = 100)

Commodity group Index (1963 = 100) 1971 quarters1969 1970 1971 First Second Third Fourth

Primary commoditi es 104 107 114 107 107 107 106

Food 106 111 116 106 105 104 104

Cereals 102 99 106 111 110 106 102

Wheat 94 90 98 113 111 109 105Rice 130 115 113 98 99 98 99Maize 97 110 112 121 110 93 89

Beverages 120 138 123 94 88 83 86

Coffee 118 153 134 97 85 83 86Tea . · 88 98 96 99 102 94 98Cocoa . 172 124 105 83 93 83 82

Meat 126 134 137 104 101 101 101

Beef 133 145 156 113 108 105 104Mutton and lamb . 120 124 123 98 104 97 97

Dairy products 107 112 132 108 113 124 129Sugar . · . 66 70 75 113 106 103 105Other food 102 103 119 115 114 117 116

Agricultural non-food 101 100 104 103 103 105 105

Fats, oils and oil-seeds 101 109 118 115 104 109 104

Olive oil . . 74 76 78 105 101 104 100Copra . · . 106 121 100 91 82 81 76Coconut oil 119 137 119 93 85 91 78Ground-nuts 105 110 131 124 98 134 122Palm kernels 98 94 92 110 90 99 92Palm kernel oil 95 104 115 101 99 128 115Palm oil 79 78 116 159 141 145 149Linseed oil 112 107 91 92 81 85 85Linseed . 101 94 91 99 98 96 96Soya beans 97 107 117 115 109 108 107Soya bean oil 100 100 148 138 133 159 161Cotton-seed oil 118 118 149 125 121 128 130

Textile fibres 85 84 84 96 99 102 102

Wool 73 64 56 82 85 90 92Cotton 97 103 109 104 106 109 109Jute 121 112 110 98 96 100 100Sisal . 45 41 49 105 120 125 125

~29-


Index (corresponding quarterof previous year = 100)

Commodity group Index (1963 = 100) 1971 quarters1969 1970 1971 First Second Third Fourth

Wood and wood pulp 106 117 124 107 103 105 106Rubber. · · . . . . 99 82 85 98 110 105 101Other agricultural

non-food 105 95 99 99 109 107 105

Minerals . · · 104 109 126 109 118 116 114

Metal ores 114 122 125 101 102 103 103

Iron ore 93 98 102 108 101 101 103Bauxite 126 145 181 116 147 123 118Copper ore 220 215 166 66 74 84 90Lead . · 165 168 142 82 86 89 81Zinc ore . 138 138 144 94 101 109 115Tin ore 137 144 136 93 94 96 94Nickel ore 134 164 169 104 104 104 101Manganese ore 77 77 92 116 121 121 121Chrome ore 102 113 136 104 104 136 135

Fuels 100 105 126 114 123 122 119

Petroleum 100 100 118 109 119 121 121Coal . · · 102 126 159 137 134 122 114

Crude fertilizer . . 114 115 115 101 100 101 101

Non-ferrous base metals 168 175 160 84 89 96 99

Aluminium 120 127 127 103 100 100 99Copper 205 207 180 75 83 93 99Lead . 166 175 143 79 82 86 79Tin 137 145 137 92 96 96 95Zinc 134 141 145 96 101 105 111

Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on data from the Statistical Office of theUnited Nations.

-30-

B. THE DEVELOPED MARKET ECONOMIES

The developed market economies experienced another year of slow growth in 1971:total output of goods and services increased by only 3.4 per cent. Although thisrate represented an increase from the 2.6 per cent rate of 1970, it was below thelong-term average. The performance of the group as a whole reflected the differencesin the phasing of economic activities among the countries. In general, while NorthAmerica entered a recovery phase in 1971, western Europe and Japan had yet to workthemselves out of the deceleration phase. The process of recovery proved to besomewhat slower than expected, and the degree of deceleration was surprisinglysevere in some major countries.

A major factor in this slow growth was the continuing threat of inflation.For a number of years the economic policies of most of these countries had beenstrongly influenced if not determined by attempts to contain inflation. Restraintson demand were widespread. It was not until the economies had been considerablydampened, sometimes beyond what was intended, that a shift in policy emphasis tookplace. A common feature of this shift was the relaxation of the restraints on, oreven the active stimulation of, demand, concurrent with the introduction orstrengthening of measures of direct price or income restraint as long as the threatof inflation remained. The differ.ences in the timing and extent of these policiescontributed to the international monetary crisis already discussed in the main bodyof the present report. The realignment of currencies following the crisis reduceda major source of imbalance in the trade relations among the developed marketeconomies and to this extent enabled them to renew their economic expansion.

Production

The growth of the total output of goods and services in the developed marketeconomies in 1971 was not only modest but 11neven in respect of both rate of growthand its relationship to the previous year's change.

North America's significant contribution to the increase in the rate ofgrowth came from both the United States and Canada. The upswing began somewhatearlier in Canada, where a 5.4 per cent rate of growth of GNP in 1971 was in linewith the growth potential and in excess of the average rate of the past decade.This growth occurred in response to a policy of selective stimulation made possibleby some success in moderating prices. In addition to strong consumer demand, bothresidential and non-residential construction and investment in natural resourcesprovided the expansionary forces.

While over-all growth in the United States reversed the recessionary tendenciesof 1970, it was still far below capacity and below the ayerage performance of the1960s. It was significant, however, that the recovery took place under adverseeconomic conditions. It was supported by exceptionally high rates of residentialconstruction and expansion in private consumption, while public expenditurereversed its sharp decline. With a very low capacity utilization ratio, privatefixed investment on plant and equipment was hesitant. The increase ininventories frequently associated with recovery did not materialize.

-31-

The developed market economies of Europe and Japan experienced a generaldeceleration of growth for the second year in succession. This deceleration wasshared by the vast majority of countries. In a number of cases, notably theFederal Republic of Germany, Italy and Japan, the slow-down was more severe thanhad been expected in either official or unofficial circles. This sluggishnesshad a depressing effect on the smaller countries in the group.

While the deceleration of growth was common to almost all western Europeancountries, it varied in magnitude and timing. Despite the slow-down in the FederalRepublic of Gerrr.aI1y and Italy, the EEC countries as a group achieved a 3.1 per centrate of growth, moderately higher than the rate for North America. In the UnitedKingdom, output increased very little and the proportion of idle resources rose.Among the smaller countries, deceleration was especially marked in theScandinavian countries, Norway being the sole exception.

The unevenness of the pattern of development is illustrated by the course ofindustrial production in 1911. In the United States, industrial productionincreased in the first half of the year, reflecting the return to work after theprevious year's strikes, but this was not followed by steady growth in the latterhalf of the year. Favourable growth was also achieved in the first half of theyear in Canada, the Federal Republic of Germany and France. In France, output wasaffected by strikes, as was the growth of industrial production in the UnitedKingdom. In Italy, production continued to fall throughout the year. In Japan,industrial production slowed markedly in spite of a continuing upward trend inexports and expansionary public consumption.

The second part of the year witnessed some recovery in the United Kingdom andfurther growth in Canada and France. By the end of the year there was animprovementtin industrial production in the United States, though the 1969 level was notregained. Production levelled off and stagnated in the Federal Republic of Germany,continued to fall in Italy and Sweden, and showed no definite signs of recovery inJapan, oscillating from month to month around a modest annual rate of increase of6 per cent.

The use of resources

The major factor behind the slow growth of output in western Europe and Japanwas the sluggish growth of total domestic demand throughout 1971. This wasaccompanied by a marked change in the composition of demand, under the influenceof a series of expansionary fiscal and monetary measures.

Economic policies aimed at reviving private consumption were partiallysuccessful in most countries. In North America, private consumer demand rosefaster than GNP. Although private consumption in the United States did notexpand as rapidly as in the past decade, it did become one of the importantfactors behind the recovery in growth. The expansion in private consumption inCanada was accompanied by a decline in the household savings ratio, which was notthe case in the United States. Private consumption also rose faster than GNP inseveral other major countries. On the other hand, household savings ratios reachedrather high levels in the Federal Republic of Germany, France, Italy, and a numberof smaller countries. This suggests a lag in consumer response to variousstimulating actions.

-32-

On the whole, expenditure in the public sector, aimed in some cases atalleviating unemployment, exerted an expansionary effect in 1971. In the UnitedStates, public consumption started to rise in 1971 as contrasted with the markeddecline in 1970. In western Europe, its expansionary role was particularly markedin Italy. In Japan, the rise in pUblic consumption reflected important changesin pUblic policy.

Parallel with the increase in public consumption, pUblic investment also rosein most developed market economies. Total fixed investment generally rose fasterthan gross national product. There was no increase in fixed investment in theUnited Kingdom or Japan, however, and an absolute reduction in investment wasrecorded in some countries in 1971 (e.g., Denmark, Italy and Sweden). The growthwas also slower than the average rate of the 1960s in countries outside NorthAmerica, with the notable exception of Austria, Belgium, Iceland, Norway andSwitzerland.

As indicated above, residential construction was among the outstanding elementssupporting the recovery in North America, especially in the United States where theincrease was particularly high. It was also a positive factor in several Europeancountries (such as the Federal Republic of Germany and the United Kingdom), whilethere was a marked decline in a few cases, such as Denmark, Italy and Sweden.

Private fixed investment fell in many major countries in 1971, including Italy,the Netherlands and the United Kingdom, and stagnated in the Federal Republic ofGermany, Japan and the United States.

The weakness in private fixed investment reflects the state of expectations.In the United States, capacity utilization was the lowest since 1958 and somedeterioration in the utilization of capacity was apparent by the end of the yearin the Federal Republic of Germany and Japan, where the weakness in businessinvestment was concentrated in export~oriented industries in anticipation of adeterioration in exports. Both countries were affected by uncertainties in thecurrency markets.

Investment in stocks was generally smaller than in 1970. In the United States,the picture was complicated by moves in anticipation of a possible steel strike inthe first part of the year. In western Europe, changes in inventories had adepressing influence in all four major countries - the Federal Republic of Germany,France, Italy and the United Kingdom - and in a number of smaller countries. InJapan, the reduction in investment in stocks was especially large.

The problem of policy mix

As far as the choice of policies was concerned, the events of 1971 posed avariety of challenges as regards direction, dosage and appropriate mix. A policydilemma was created when countries were faced with unemployment as well as inflation.As domestic activities indicated a policy of ease while payments deficits called foran opposite policy (e.g., in the United States), or the reverse (e.g., in theFederal Republic of Germany and Japan), conflict arose between domestic needs andexternal requirements. Decisions had to be made on whether a given policy dosagewas too hesitant to be credible or so abrupt as to be unsettling. The precise roleto be assigned to each policy instrument, individually and in combination, neededto be most carefully balanced.

-33-

The background to this difficult choice lay in the inflationary tendenciesthat had existed for a number of years. By 1971, the significance of inflationas regards policies had become increasingly evident. In the first place, despiteanti-inflationary measures adopted earlier, the pace of inflation remained at arelatively high level. For the developed market economies as a group, the rate ofinflation - as indicated by the rise of consumer prices - was in excess of5 per cent, as compared with 3.4 per cent in the past decade. Moreover, therewere indications that the post-war tendency for the rate of inflation to ~uicken

would continue, unless potent measures were adopted to reverse the trend. Indeed,the primary policy objectives of most Governments shifted from unreserved pricestability to a more flexibly defined reasonable rate of price rise.

Even this more modest objective was difficult to attain with the familiarinstruments of policy. It is true that demand management, by means of monetarypolicies especially, had been vigorously pursued for some time. Interest rateswere pushed to new high levels in numerous countries at the beginning of 1970.Quantitative limitations were imposed in order to restrain the availability ofcredit. Although it was not always easy to disentangle deliberate fiscal policiesfrom built-in changes resulting from past decisions, the restrictive intent wasunmistakable in such countries as the United States and the United Kingdom in thelatter part of the 1960s. Even in countries where fiscal restraint was not apparent,there was discernible resistance to clamouring for expanded pUblic expenditure byvarious interest groups.

Yet, the effect of demand restraint on prices was by no means straightforward.On the one hand, a reduction in the pressures of demand could moderate the rise inprices. Inflationary expectations could also be altered by an apparentlyconvincing policy of restraint. On the other hand, the resultant dampening ofeconomic activities could have an unfavourable effect on productivity and thus onunit costs. This was fre~uently aggravated by the tendency towards continuedincreases in wage rates, not only because periodic increases had become customaryin the general framework of growth expectation but also because grievances neededto be redressed as prices rose faster than had been presumed in earlier wagenegotiations. As a result, under conditions of collective bargaining wheredecisions were not'made by atomistic units, the rise in wage rates showed littlesign of a general slow-down in 1970 and 1971, even when the economy slackened.

In the meantime, unemployment increased in virtually all countries. Althoughthe situation gave no cause for serious concern in those countries where theabsolute level was still very low, where vacancies continued to exceed ~ualified

applicants and where there were still a large number of immigrant workers, the rateexceeded 5 or 6 per cent in a number of countries. This was aggravated in somecases - the United States, for example - by demographic shifts and regionaldifferences, so that the number of unemployed was especially high among the youngand in depressed regions. Moreover, unemployment beyond a certain point tended tohave a multiplier effect as members of the families of the unemployed - normallynot in the labour force - sought to supplement family income by seeking employmentbut, in the end, joined the ranks of the unemployed in most cases.

It was the repeated demonstration of the limited effectiveness of demandmanagement in counteracting inflation and the persistence and severity ofunemployment that prompted a number of countries to reverse their monetary andfiscal policies.

-34-

It was admitted, however, that a time lag was to be expected before demandrestraint produced its anti-inflationary effect. Moreover, a short-lived antiinflationary measure might be interpreted as an admission of defeat. Furthermore,in a number of countries, such as the United Kingdom and the United States, animprovement in the payments balance was regarded as essential. Thus, the approachto a policy of active ease was at first mainly cautious.

The United States was one of the first to give signs of ease when recessionarytendencies became apparent. As early as the first half of 1970, monetary restraintwas progressively removed. As United States borrowing on the European marketsdropped, the easing of Euro-dollar rates exerted a downward pressure on interestrates in other financial centres. This impact was resisted in most countries,however. The lag in interest movements in such countries as the Federal Republicof Germany and Japan, for domestic purposes, in turn accentuated the paymentsimblance of the developed market economies.

A series of fiscal relaxations emerged more clearly in the course of 1971.Not only were large fiscal deficits officially accepted as appropriate in conditionsof underemployment but they were frequently in excess of planned figures,reflecting the early caution and the need for progressive relaxation.

The conflict between domestic and external requirements was at leasttemporarily resolved by the August measures and the subsequent realignment ofcurrencies which added a new dimension to policies. With differential adjustmentsto exchange rates the burden on other policy instruments became more manageable.

The fight against inflation, however, was far from over. Despite some signsof moderating prices in the course of 1971, there was a danger that a combinationof monetary and fiscal ease might renew the threat of inflation. Consequently, anumber of countries resorted to more direct restraints on prices and incomes.A temporary freeze of prices and wages and a voluntary freeze of dividends wereimposed in the United States as a part of the August package. The aim was toachieve a shock effect as well as to gain a cooling-off period before a moreflexible, and at the same time more complicated, machinery could be set up forconsidering specific cases. Similarly, a mandatory approach was observable earlierin a number of European countries, notably the Scandinavian countries.

A less rigorous intervention ensured in the United States as soon as the PayBoard and the Price Commission were set up. The degree of control generalJy variedwith the size of the firms concerned. While general guidelines for pay increasesand price rises were issued, a number of exceptions were also allowed.

In France, although freezes had also been introduced from time to time, themain development in 1971 was the contrat anti-hausse agreed upon between theGovernment and the Federation of Employers. While the aim was to impose a limiton the rise of prices, the precise conditions varied among sectors. In the UnitedKingdom, voluntary price restraint was agreed to by the Confederation of BritishIndustry as well as the nationalized industries.

There is no doubt that the success of such prices and incomes policies couldsolve much of the dilemma of policy choice. It could permit an expansionarypolicy to ensure growth without inflation. Moreover, it could also avoid thedilemma of interest rate policies in situations where domestic and external

-35-

requirements diverge. Nevertheless, recent experience has also demonstrated thatdespite the short-term benefits, difficulties have tended to mount with prolongedapplication.

As far as direct price restraint is concerned, there has been a trend towardsan increasing number of exceptions, as many items are subject to seasonal influencesand exogenous factors. Moreover, in the longer run, incipient quality changes havetended to skirt price regulations, and the flow of reSourCes has tended to beredirected into relatively profitable channels. Restraint of incomes concentratedon wages raises the question of equity. ~fuile some element of restraint on profits,such as control of dividends and profit margins, has been introduced, it should notbe equated with effective restraint of profits since these are a residual andcannot always be anticipated. Moreover, there is the fundamental question of howentrepreneurial efforts are to be rewarded. Even the regulation of wages hastended to raise the question of equity among different groups and occupations,and attempts to consider every case on its merits not only impose a heavy burdenon the administrative machinery but also tend to increase tension by politicizingthe process of wage determination.

It is for these reasons that many Governments appear to have been oscillatingin their positions with respect to prices and incomes policies. ~fuen other measureswere judged inadequate or inappropriate, resort was had to direct restraint ofprices and incomes. When difficulties mounted, this approach was again modifiedor abandoned.

This pattern of experience should not suggest that sustained prices andincomes policies are inherently impossible in a primarily private enterpriseeconomy. It does suggest, however, the need for new approaches going more deeplyinto the entire process of price and income determination.

Outlook

The year 1972 has started with some signs of renewed, though moderate,expansion. The arrangements made after the international monetary crisis haveimproved the atmosphere, even though longer-term solutions are yet to benegotiated. As most economies are still operating below capacity, the emphasisof policies is likely to continue to be expansionary. This has been made possibleby the apparently more moderate pace of inflation and less severe externalimbalance.

Nevertheless, the expansion is as yet in its early stages. For 1972 as awhole, it is unlikely that the rate of growth will be such as to approachpotential capacity. For the developed market economies as a group, the aggregaterate might be around 4.6 per cent as compared with 3.4 per cent in the previousyear. This rate, on top of several years of slow growth, is not adequate to bringabout full capacity utilization, nor is it sufficient to absorb a sizable amountof the unemployed and the new entrants into the labour force.

Apart from some of the southern European countries, signs of expansion aremost evident in North America. The expansionary phase in Canada is alreadyrelatively advanced. It is likely to be continued, at least in 1972, as demandcontinues to respond to tax cuts and better profits. In the United States,although some of the forecasts may appear to have been too optimistic, there is

-36-

hardly any doubt that the 1971 rate will be almost doubled. Here, also, substantialtax cuts will aid the expansion of demand, although active monetary ease may notcontinue for long.

The outlook for the western European countries is more uneven. The EuropeanCommunity as a group is still in the early stages of adjustment to recessionarytendencies. On the whole, the rate of growth is unlikely to be higher than therelative]~ low rate of 1971. In the Federal Republic of Germany, the floating ofthe mark in 1971 and the subsequent revaluation have dampened export expectations.Moreover, in the face of industrial unrest and strong pressure for higher wages,official policy for expansion has so far been cautious,although the requiredrefunding of surcharge is likely to stimulate consumer demand in the second halfof 1972. In France, the rate of growth, although expected to remain high, partlyin response to increased pUblic expenditures, may not equal that of the previousyear. Italy appears to be the only member of the Community which should improveupon the unusually low rate of 1971, since pUblic programmes are stronglystimulative.

The four countries which are expected to join the Community next year shouldbetter their performance of 1971. The recovery of the United Kingdom economy maybe especially strong, as the April budget has greatly added to expansionary measuresadopted earlier. The removal of uncertainty with respect to membership in theCommunity should also provide a better climate for investment.

Although the Japanese economy has regained its poise after the shock of 1971,its growth is unlikely to match the high rate of the 1960s, despite vigorous fiscalexpansion for the improvement of infrastructures and welfare.

Among the expansionary factors in the developed market economies, consumerdemand is likely to playa significant role, as fears of recession are allayedand consumer incomes are bolstered by deliberate fiscal policies. While fixedinvestment is also being stimulated by fiscal incentives in many countries, thelow rates of capacity utilization will dampen the pace of recovery for some time.Leading indicators in residential construction suggest continued expansion in thissector in a number of countries, including Canada and the United States, theFederal Republic of Germany and the United Kingdom, and recovery in several othercountries.

One result of the relatively high rates of expansion in North America and thelower rates in western Europe and continued moderate growth in Japan is thedampening of trade, since the economy of the former is less dependent on trade.This tendency is accentuated by relative exchange rate adjustments. While therate of growth of trade is likely to remain somewhat higher than that of output,not much buoyancy is expected.

~37-

Table B.1. Developed market economies: growth of gross domesticproduct in constant market prices, 1961-1972

(Percentage)

Average annual rate Change from preceding yearGroup and country 1961- 1968-

1971~/ 1972E./1970 1970 1969 1970

North ft1n$rtca 4.1 2.4 2.7 -0.4 2·9 5.1

Canada • · · 5.0 4., 4.8 ,.2 5.4 6.0United States 4.0 2., 2.6 -0.7 2.7 5.0

Western Europe 4.9 5.4 6.1 5.1 ,., 3.4

EEC 5., 6.2 7.1 5.7 ,.7 ,.0

Belgium · 4.9 5.4 6.7 6.1 3.8 3.3France. · · · · 5.8 6.1 7.7 5.9 5.5 4.5Germany (Federal

Republic of) • 4.8 6.8 7.9 5.6 ,.5 2.0Italy · · · 5.5 5.3 4.8 5.3 0.5 3.0Luxembourg • 3.4 5.5 7.5 ".5 2.0 1.5Netherlands 5.2 6.2 5.7 6.0 5.6 2.0

.Ot~er· . · · 4.2 4.0 4.4 4.0 2.6 4.2

Austria 4.7 5·9 6.2 7.1 5.5 4.0Cyprus • 6.1 5.7 9.6 3·3 8.0 7.5Denmark 4.9 5.2 8.3 3.1 2-.0 2.5Finland 5.4 6.9 10.4 7.8 1.4 3.0Greece • 7.4 6.7 8.0 7.5 7.0 7.5

Iceland 4.4 0.7 2.0 6.0 9.3 7.3Ireland 3.9 4.4 4.1 1.5 3·0 4.0Malta. 5.4 11.2 13·1 10.4 9.0 9.0Norway • 4.8 4.1 4.7 3.6 5.1 4.7Portugal 6.1 6.1 3·2 7.6 6.5 7:5

Spain 7.6 6.7 7.6 6.8 6.5 7.0Sweden • 4.4 3.7 5.2 4.6 0.3 3.7Switzerland 4.3 4.5 6.1 4.2 4.4 4.0Turkey • · 6.3 6.0 5·9 5.6 7.9 7.0United Kingdom 2.7 2.3 1.6 2.0 LO 3.5

Asia- Ic· ILl 12·3 lL9 10.5 6.1 6.0Ja~an- · · · · ·Southern hemisphere 5.3 5.6 7.5 5.5 4.2 3.9

Australia d/. • · 5.2 6.1 8.4 5.7 4.3 3.6New Zealand ry . · 3·9 3.7 5.5 4.0 3.5 4.5South Africa • · · 5.8 5.3 7.0 5.1 4.0 4.5

Total (27 developedmarket economies) 5.0 4.4 4.8 2.6 3.4 4.6

Source: Centre for Development Planning, Projections and Policies of the United NationsSecretariat, based on Statistical Office of the United Nations, Yearbook of National AccountsStatistics; Organisation for Economic Co-operation and Development, Economic outlook (Paris),and national sources.

~/ Preliminary.

~/ Projections.

~/ Gross national product.

~/ Fiscal years ending 30 June for Australia, 31 March for New Zealand.

-38-

Table B.2. Selected developed market economies: changes in major componentsof gross domestic product in constant prices, 1961-1971

(Average annual rate and percentage change from preceding year)

Private Public Fixed Changes Grosscon- con- invest- in inven- national

Country and period sumption sumption ment tories al Exports Imports product

North America

Canada1961-1970 • · 4.7 4.2 4.8 1.1 9.2 6.9 5·21970 · · 2.0 9.6 1.1 0.1 13.2 3.31971 · · 6.1 4.5 6.2 0.2 5.0 9.8 5.4

United states1961-1970 4.2 4.2 3.7 0.9 6.6 7.6 4.01970 · · · · 1.4 -4.3, -3.2 0.3 7.6 3.1 -0.71971 · · 3.3 -0.1 6.4 0.2 -0.2 4.8 2.7

Western Europe

Austria J1961-1970 • · 4.5 3.0 .6.0 1.5 8.5 8.4 4.71970 · · · --. 5.8 2.8 10.5 2.5 15.5 15.4 7.11971 · · · 6.8 3.5 12.0 6.5 8.5 5.5

Belgium1961-1970 • 4.1 5.8 5.7 0.8 9.8 9·1 4.81970 · 3·9 4.4 4.2 0.6 14.0 9.8 6.11971 · · 4.0 4.0 6.0 9.5 9.5 3.8

Finland. 1961":1970 5.0 5.8 4.0 3·9 7.6 8.3 5.4

1970 · · · 6.3· 5.8 11.9 7.1 8.3 19·0 7.81971 · · 2.3 5.0 0.5 7.3 -0.5 -0.2 1.4

France J1961-1970 5.7 3.6 8.9 2·3 9·3 10.8 5.8 EI1970 · · 4.3 3.8 7.4 2.9 15.9 7.7 5.9 bl1971 · · 6.3 3.5 5.0 -0.3 8.7 7.3 5.5 hi

Germany (Federal Republic of)1961-1970 4.7 4.8 5.8 1.3 9.0 10.2 4.81970· • · 6.8 4.3 11.5 1.8 8.1 .15.1 5.51971 · · 5.3 6.1 4.0 0.6 6.2 9.2 2.8

Iceland1961-1970 5.5 5.4 4.6 1.0 8.3 8.6 4.51970 · 12.2 4.5 8.6 -0.8 19.3 26.4 6.01971 · · 15.5 6.4 34.0 3.0 -3.8 25.3 9·3

Ireland1961-1967 3.5 4.2 9.8 1.5 7.4 8.6 3.91970 · · 1.9 3.8 -1.3 1.2 10.2 7.3 1.51971 · · 2.1 5.5 5.7 5.5 4.3 3.0

Italy1961-1967 • 6.0 4.0 4.8 1.2 11.8 11.6 5.71970 · · · · . 8.0 3.2 3.8 1.6 5.1 15.6 5.11971 · · · · 2.5 3.8 -5.5 4.0 -0.5 0.5

-39-

Table B.2. (continued)

Private Public Fixed Changes Grosscon- con- invest- in inven- national

Country and period sumption sumption ment tories !!:./ Exports Imports product

Western Europe (continued)

Luxembourg1961-1970 4.2 2.2 2.5 0·3 4.9 5.4 3.41970 · · 8.0 1.5 11.3 1.5 8.7 3·51971 • . 4.5 1.5 3·0 2.0 3.4 2.0

Netherlands1961-1970 5·9 3.2 7.0 1.8 8.7 9.8 5.11970 7.4 5.5 7.2 2.1 13.2 13.8 5.61971 4.4 3.2 6.6 1.1 8.5 8.0 5.6

Norway1961-1970 4.1 6.4 5.4 1.0 7.7 8.1 4.91970 2.8 0.5 13.0 3.2 1.5 13.5 3.41971 · · .. 5.0 4.8 11.2 1.6 2.1 3.8 4.8

Sweden1961-1970 3.8 5.4 5.1 1.3 7.6 7.3 4.41970 · e-.2 7.2 3.4 2·9 9·0 9·7 4.91971 · · . -0.2 4.2 -2.4 0.8 5.5 -2.7 0·3

Switzerland1961-1970 4.7 4.6 6.0 1.3 7.6 9·0 4.51970 · · . 5.3 2·3 8.0 0.9 7.2 13.7 4.61971 · · 5.5 3.7 7.9 2.6 5.0 4.3

United Kingdom1961-1970 • 2.4 2.1 4.5 0.8 4.9 4.0 2.7 b/1970 2.8 1.5 1.6 0·9 5.0 5.7 2.0 b/1971 3.0 2.2 0.2 5.1 5.8 1.0 '§./

Asia

Japan1961-1970 9·1 6.6 14.9 4.1 14.8 14.0 11.11970 · 7.6 7.0 13·7 4.6 15.6 21.3 10.41971 7·9 7.4 7.5 1.5 18.3 3.1 6.1

Southern hemisphere

c/Austra1ia-1961-1970 4.4 6.4 5.9 1.2 7.9 6.0 5.21970 · · 5.5 2.7 4.9 1.4 19·2 10.2 5.81971 · · 3·1 4.9 3.8 1.3 8.3 3.1 4.3

South Ai'rica1961-1970 • 5.5 6.9 8.3 2.4 4.3 7.6 6.2 b/1970 7.1 6.0 12.7 4.3 -0.8 16.2 4.8 b/1971 · · 4.4 9.6 7.0 3.1 6.4 8.0 3.7 '§./

Source: Centre for Development Planning, Projections and Policies of the United Nations Secretariat,based on Statistical Office of the United Nations, Yearbook of National Accounts Statistics, and nationalsources.

!!:./ At current prices, as percentage of gross national product.

"E./ Gross domestic prOduct.

:d Fiscal years ending 30 June.

-40-

Table B.3. Developed market economies: rate of increase in consumer prices, 1961-1971(Percentage)

Change from correspondingquarteT o{-i"9T<5··· -

Country~/ Average annual rate1961-1970 1968-1970

Change from preceding year1969 1970 1971

1971 quartersFirst Second Third Fourth

Turkey •••Portugal. •New Zealand •United KingdomIreland

Spain •NetherlandsSweden.Japan. •Finland ••

SwitzerlandNorway •••South AfricaAustraliaIceland

DenmarkFrance •••••••••Germany (Federal Republic

of)Italy ••Luxembourg

Austria •Belgium •United statesCyprusGreece

CanadaMalta

North America

21 developed marketeconomies of Europe

EEC

Japan

Australia, New Zealandand South Africa ••

Total, 27 developedmarket economies ~/••

6.04.53.84.14.8

6.04.14.05.75.0

3·34.52.72.5

11.9

5.94.0

2.83·92.6

3.63.02.81.12.1

2.71.9

2.8

4.1

3·5

5.7

2.7

3.4

6.37.15.35.56.8

4.25.23·96.14.6

2.85.73·33.2

16.8

6.05.4

2.73·03·2

3.43.55.12.92.0

4.02.7

4.5

3.8

6.1

4.8

4.88.84.95.47.4

2.27.42.75.22.2

2.63.12.92·9

21.8

3.56.4

2.72.72·3

3·13·75.42.42.4

4.52·3

5.3

4.2

4.2

5.2

3·1

4.8

7·96.46.66.48·3

5.74.57.17.72.7

3·510.6

5.23.8

13.0

6.55.2

3.84·94.6

4.44·.05·92.43·2

3.43.7

5.6

19·011.910.49·58·9

8.37.67.46.76.6,

6.66.36.16.06.0

5.14.84.7

4.74.44.34.13.1

2·92·3

4.2

6.6

5.2

6.7

5.3

11.37.4

10·38.6

10.0

7.76.78.66.64.0

6.27.25.34·9

11.8

6.04.9

4.24.94.3

4.43.55.04.24.3

1.73·7

4.7

5.9

4.7

6.6

5.5

5.3

15.411.510.99.88.5

9.57.66.97.25.5

6.86.75.75.49.7

6.85.1

4.94.74.5

4.23.94.44.63.1

2.23.8

4.2

5.0

7.2

6.0

5·3

24.412.811.410.18.9

7.37.66.98.47.8

6.75.96.36.64.2

5.64.84.6

5.04.64.32.83·1

3·22.2

4.2

7.0

5.5

25.016.09.19.28.7

8.58.37.24.88.6

6.65.56.77.00.8

5.65.6

5.74.75·3

5.15.43.55.03.2

4.2-0.3

3.6

7.0

5.6

4.8

7.1

Source: Centre for Development Planning, Projections and Policies of the United Nations Secretariat,based on Statistical Office of the United Nations, Monthly Bulletin of Statistics and Yearbook of NationalAccounts statistics, and on national sources.

~ Countries are arranged in descending order of percentage increase in consumer prices from 1970to 1971.

~/ Weighted by private consumption in 1969.

-41-

Table B.4. Selected developed market economies: rate of increasein hourly earnings a/ in rr.anufacturing, 1968-1971

(Percentage change from preceding year)

CountryE! 1968 1969 1970 1971

United Kingdom 8.6 7.9 12.7 11. 5Ireland 8.8 12.8 16.1 16.8 r;:./Netherlands d/ £/ !/ . . 7.3 9.9 10.7 11. 7Sweden £5/ 6.5 8.1 13.1 7.7Japan 15.8 8.7 21.8 9.0

Finland !/ 11.8 6.8 8.1 12.9Switzerland ~/ !/ 4.0 3.9 6.7 9.8Norway £/ £5/ 7.5 9.7 12.0 13.7Australia ~/ £/ 6.6 6.1 4.9 10.6 h/Denmark 12.2 11.4 10.8 15.0 fj

France d/ 12.4 11.3 10.5 11.2Germany-(Federal Republic of) 4.3 9.1 12.8 11.8Italy §j . 3.6 7.5 21. 7 13.5Aus tri a i./ !I 6.9 5.8 10.1 11.1Belgium 5.6 7.9 11.0 12.2

United States 6.1 6.6 5.4 5.8Canada . . 7.3 8.3 8.4 8.7 b/

Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on Statistical Office of the United Nations,Monthly Bulletin of Statistics; Organisation for Economic Co-operation andDevelopment, Main Economic Indicators (Paris), and national sources.

~ Unless otherwise stated, earnings data cover cash payments tomanufacturing employees including overtime pay, incentive pay, earnings of pieceworkers etc. Sccial insurance contributions and family allowances are excluded.

E! Countries are arranged in descending order of percentage increase inconsumer prices from 1970 to 1971.

~/ Change in the first three quarters of 1971 from the corresponding periodof 1970.

§j Hourly rates.

_~./ Males only.

!I Industry.

gj Mining ar-d manufacturing.

Q/ Change in the first 11 months of 1971 from the corresponding periodof 1970.

if Change in the first half of 1971 from the corresponding period of 1970.

-42-

Table B.5. Selected developed market economies: unemploymentrates and changes in unemployment, 1969-1971

Percentage change in number of unemployed in 1911Unemployment rate from 1970, and from corresponding quarter in 1970

1971 1971 guartersCountry 1969 1970 1971 First Second Third Fourth

New Zealand 95 -16 61 126 209Sweden L9 1.5 2.5 71 43 47 82 94Netherlands L4 Ll L6 34 2 21 46 76United Kingdom 2.5 2.7 3.6 33 15 29 39 49Spain . 30 17 39 37 30

France . . . . . L S§./ 2.0~ 2.4~./ 28 36 28 26 25Germany (Federal Republic of) O.S 0.7 0.9 26 - 1 37 48 54Denmark 3.9 2.9 3.7 25 -11 50 100 44United States 3.5 4.9 6.0 22 47 26 17 4

iFinland . 2.S L9 2.2 20 13 34 45

.j::"""

L4 L6 8 16 16w Australia L5 17 31ICanada 4.7 5.9 6.4 12 28 11 3 3Japan Ll L2 L2 8 11 11 2 7Ireland 6.4 7.2 7.2 2 6 -10 - 2 15Italy. 3.4 3.1 3.1 - 2 5 - 5 1

Belgium 3.7 3.0 2.9 - 1 -12 - 6 9Norway LO 0.8 0.8 - 2 -17 1 9 11Austria 2.8 2.4 2.1 -11 -24 - 6 2 1

Source: Centre for Development Planning, Projections and Policies of the United Nations Secretariat,based on Statistical Office of the United Nations, Monthly Bulletin of Statistics.

Note: Countries are arranged in descending order of percentage increase in number of unemployed in1971. Unemployment rate refers generally to the ratio of registered applicants for work or personsreported unemployed in a survey to the civilian labour force. Because of differences in definitions,intercountry comparisons cannot in general be made. Changes in statistical methods affect inter-temporalcomparison, especially for Italy.

§./ Estimate.

Table B,6, United States: balance of trade, by countrygroup, 1965-1966 and 1970-1971

(Millions of dollars)

Group and country

1971Exports, Imports, Tradef,o,b, f,o,b. balance

Changeof tradebalance,1970 to

1971

Percentageshare indeterioration oftradebalance,1910 to

1971

Tradebalance,

19651966

(average)

Change oftradebalance,1965-1966to 1971

a/Horld- ,., ., ,.'

Developed market economiesEEC ,.

France ,Germany (Federal

Republic of)Italy ,

United KingdomJapan . .Canada, .Other developed

market economies


Centrally planned economies

Unspecified~ . ,.

44,137

29,4648,0651,370

2,5771,2852,3504,032

10,341

4,676

12,791

384

1,497

45,602

33,6837,5241,088

3,6511,4062,4597,261

12,762

3,678

11,649

227

41

~1,465

-4,219541282

-1,074-121-109

-3,228-2,421

998

1,143

155

1,456

-4,729

-4,239-1,109

-258

-564-136-418

-1,994-399

-319

-617

28

100

100,0

89,623,45,5

11.92.98,8

42,28,4

6,7

13.1

-0,6

-2.1

5,127

2,4241,378

283

- 40193

9-498

527

1,009

1,520

14

1,167

-6,592

-6,644-836

1

-1,033-314-119

-2,731-2,947

- 11

-378

141

288

Source: Centre for Development Planning, Projections and Policies of the United Nations Secretariat,based on Organh:ation for Economic Co-operation and Development, Overall Trade by Countries, Series A(Paris); United States Department of Commerce, Bureau of Census, United States General Imports. UnitedStates E~orts tHashington, D.C.), various issues.

a/ Ineluding special category commodities which are not included in each individu~l country orregio;':;- but are grouped as "unspecified",

Table B070 United States: balance of trade, by commoditygroup, 1965-1966 and 1970-1971

(Millions of dollars, except as otherwise indicated)

SITC Item

1970

Exports,~ Imports,fooobo fooobo

Tradebalance

Changeof tradebalance,1970 to

1971

Percentageshare indeterioration oftradebalance,1970 to

1971

Tradebalance,

19651966

(average)

Change oftradebalance,1965~1966

to 1971

1,289

-1,883

-1,144

937

556

-4,795

6,705

4,993

96

551

1,280

1,670

-2,991

2401

10000

731

150

-2,143

-1,1435,561

1,385

-1,332

-2,217

2,225

-7,786

-2,105

6,407

3,556

45,602

13,904

3,715

1,612

14,933

1,497

3,837

7,147

43,497

Chemicals

Manufactured goods

Total trade

Machinery and trans-port equipment 19,465

3

o and 1 Food and liveanimals; beveragesand tobacco 5,075

2 and 4 Crude materialsexcept fuels;animal and vege-table oils and fats 4,941

Mineral fuels,lubricants andrelated materials

5

6 and 8

7

Source: Centre for Developing Planning, Projections and Policies of the United Nations Secretariat,based on Statistical Office of the United Nations, Yearbook of International Trade Statistics; UnitedStates Department of Commerce, Bureau of the Census, Foreign Trade Annual (Washington, DoCo), variousissueso

~ Not including foreign exports, which accounted for approximately 1.5 per cent of total exports.

Table B.8. United States: balance of payments,selected items, 1970-1971 ~

(Billions of dollars)

Item 1970

1970 quarters£!

1971El First Second Third Fourth

c/1971 quarters-

First Second Third FourthEi

Balance on goods, servicesand remittances

Balance on current account

Balance on current accountand long~term capital

Net errors and omissions

2.18

0.44

-3.04

-1.10

- 0.77

- 2.77

- 9.28

-10.88

-1. 30

-0.06

0.68

0.29

-0.57

-0.37

0.64

0.20

-0.34

-0.44

0.32

-0.16

-0.83

-0.23

0.81

0.38

-1.31

-1.02

-0.35

-0.83

-3.26

-2.31

- 0.33

- 0.87

- 3.19

5.28

-0.89

-1.45

-1.52

-2.27

-5.75 -12.19 -6.29

1.19 -0.19

0.30

I+::0\I

Official reserve transactions balance

Financed bychanges in:

Official reserves

Gold

Liabilities to foreignofficial agencies:

Non-liquid

Liquid

2.48

0.79

-0.27

7.62

- 0.20

27.62

-2.86

0.26

-0.04

-0.42

3.02

-1. 40 -2.08

0.80 0.58

0.01 0.39

0.50 -0.24

0.10 1.74

-3.48

0.82

0.42

-0.11

2.77

-5.55

0.68

0.11

-0.21

5.08

0.66

0.46

-0.17

5.26

- 0.18

11.17

0.36

6.11

Source: Centre for Development Planning, Projections and Policies of the United Nations Secretariat,based on United States, Department of Commerce Survey of Current Business (Washington, D.C.).

§/ Positive figures are credits; negative figures are debits.

£! Preliminary.

£/ Seasonally adjusted.

Table B.9. Developed market economies: international reserves,~/ 1970-1971(End of period; millions of dollars, except as otherwise indicated)

Group and country

End 1970Millions Percent-

of agedollars distribution

Percentage change

Dec. 1970- June 1971- Dec. 1970June 1971 Nov. 1971 Dec. 1971

End 1971Millions Percent-

of agedollars distribution

North .America

United statesCanada • • •

Western Europe

EECBelgium

France ••Germany (Federal

Republic of)Italy •••Netherlands

otherAustriaCyprusDenmarkFinlandGreece

IcelandIrelandMalta.NorwayPortugal

Spain •SwedenSwitzerlandTurkey ••United Kingdom

Southern hemisphere

Australia ••New Zealand •South Africa

Asia

Japan

Total •

14,4874,679

30,0032;8474,960

13,6105,3523,234

1,758208484480310

54697158811

1,5041,817

7615,132

4312,827

1,692126

1,012

4,840

74,271

40.43.86.7

18.37.24.4

2.40·30.70.60.40.10.90.21.12.02.41.06.90.63.8

2.30.21.4

100.0

-6.83.7

17.112.314.0

22.713.88.1

7.313.5

-12.49.86.5

24.115.220.318.22.9

29.826.8-1.02.8

28.1

21.47.1

-15.6

61.2

-10.28.7

8.74.2

32.5

4.05.61.6

15.510.638.918.839.7-3.020.3-2.615.415.231.64.4

28.547.253.9

19·910.0

-21.9

-9·021.8

35.622.066.0

35.126.817.4

33·336.550.448.869.029.642.925.342.329·378.945.935.779.4

132.8

96.0150.0-29.7

13,1895,699

40,6743,4738,235

18,3826,7873,797

2,34328472871452470

996198

1,1541,9453,2511,1106,966

7736,582

3,316315711

15,359

106,901

12·35.3

38.03·27.7

2.20.30.70.70.50.10·90.21.11.83.01.06.50.76.2

3.10.30.7

14.4

100.0

Source: Centre for Development Planning, Projections and Policies of the United Nations Secretariat,based on International Monetary Fund, International Financial Statistics, various issues.

~/ InclUding gold, positions in International Monetary Fund, and foreign exchange.

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Table B.10. Developed market economies: over-all balanceof feyments, ~ 1970-1971

(Millions of dollars)

1971!2./1971 guarters c/

Group and country 1970 First Second Third Fourth b/

North America

United States -9,821 -29 ~ 767 -4,718 -6,462 -12,704 -5~883Canada 1,574 891 166 7 140 578

Western Europe

EEC · . . . 9~628 10,107 3,908 1,453 2,906 1,840Belgium~Luxembourg 308 325 192 126 87 -80France . . . 1,949 3,272 464 573 1,679 556Germany (Federal Republic

of) · 6,168 4,534 2,265 800 414 1,055Italy . . 496 1,425 680 6 620 119Netherlands 707 551 307 -52 106 190

OtherAustria 210 499 14 100 352 33Denmark 38 219 111 ~170 -15 293Finland 116 200 78 -17 17 122Greece -7 204 -12 33 121 62Iceland 24 18 9 6 6 -3

Ireland 6 293 104 2 95 92Norway. 102 341 73 85 163 20Portugal 59 356 1 38 180 137Spain . 536 1,375 260 281 590 244Sweden 65 318 106 98 33 81

Switzerland 707 1,524 ~509 460 1,466 107Turkey 149 342 4 -7 136 209United Kingdom 2,991 6,260 2,101 887 1,400 1,872

Southern hemisphere

Australia . 417 1,567 388 469 285 425New Zealand . 13 182 42 93 36 11South Africa -423 -301 -69 -88 -59 -85

Asia

Japan · . . 1,130 10,336 931 1,992 5,570 1,843

Total, above!?:..! 7,514 4,964 2,988 -740 718 1,998

(Source and foot-notes on following page)

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(Source and foot-notes to table B.IO)

Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on data from the International Monetary Fund.

a/ Over-all balance is measured by changes in official gold holdings, inspecial drawing rights, in reserve positions in the Fund, in foreign exchange assets,in other officially held foreign assets, in use of Fund credit and in liabilities toforeign monetary authorities. Positive figures indicate surplus; negative figuresindicate deficit. See also foot~note ~/.

£! Figures for the fourth quarter and the full year 1971 are provisional,based on information on the financing items Hbelow the line\!; they have beenadjusted as far as possible to exclude valuation changes arising from the currencyrealignment in December 1971; that is, for each individual country the increase Inthe United States dollar value of holdings of gold, special drawing rights andreserve positions in the Fund have been excluded but similar adjustments forincreases in the value of holdings of currencies other than the dollar have beenmade only for those countries that have pUblished full quarterly balance of paymentsdata adjusted in such a manner.

£! Not seasonally adjusted.

d/ The surpluses for these countries do not necessarily imply an equivalentamount of deficits for the rest of the world. While there are many reasons for1ipositive asymmetries", the large excess of surpluses recorded in 1970 and 1971for these countries and for the world was due to the large amount of officialplacements of liquid funds in the Euro-dollar market. In the course of 1971 andespecially during the fourth quarter, the surpluses were increasingly attributableto expansion of holdings of currencies other than the dollar.

C. THE CENTRALLY PLANNED ECONOMIES

Eastern Euro~e and the USSR

For the Union of Soviet Socialist Republics and the centrally planned economiesof eastern Europe, 1971 was the first year of a new five-year plan period. Thisopening was, by and large, successful. National income growth rates were above thoseprevailing in the 1960s in all the countries of eastern Europe, and the decelerationin the USSR was almost in conformity with what was planned. Apart from thepersistent problems of investment efficiency and industrial productivity, no majorsetbacks seem to have occurred.

The only significant shortfall in production was suffered by some countries inagricultural output other than grain, particularly sugar beet and potatoes, due tounfavourable weather conditions. Most affected were the USSR and the Germa:lDemocratic Republic: al the USSR had to increase significantly its sugar purchaseson the world market, thus contributing to the steep rise in the world price ofsugar in the last quarter of the year.

Although not all the countries of the group have published the final versionsof their five-year plans for 1971~1975, enough is known to be able to characterizethem as being generally oriented towards increased emphasis on the growth ofconsumption. In the USSR, this tendency appears against the background of a slightdeceleration of output growth accompanying a reduction in the planned growth rateof investment. The eastern European countries, on the other hand, all aim at anacceleration of over-all growth; the fact that targets for gross industrial outputdo not reflect this aim shows the importance attached to more efficient utilizationof material inputs. The shift towards consumption in the development strategy,admittedly not very marked in the aggregate indicators, resulted partly from thefact that the level of industrial development already achieved made it possible,and partly from a recognition of the role of private consumption in enhancing thegrowth of labour productivity. The latter is becoming increasingly important inmost countries of the group due to the exhaustion of labour reserves.

This recognition of the need to allow for greater increases in consumptioncaused three types of shift in the allocation of resources in the five-year plans:increases in the share of consumption in the national income; the restructuringof investment in favour of consumer goods production, housing, communal servicesetc.; and the redeployment of labour in favour of consumer-oriented services. Thelast mentioned emphasizes the need to intensify efforts to accelerate growth oflabour productivity in material production. The planned increase in consumption andassociated investment lends stress to the importance of increasing the efficiencyof productive investment. Hence, a strong emphasis on technological andorganizational progress and on the need to infuse more modern technology intoindustry is also characteristic of the plans.

al In Poland, a bad beet crop seems to have been largely compensated forby an increase in sugar content.

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These basic features of the five-year plans were widely reflected in the annualplans of individual countries for the year 1971. The outstanding characteristic ofthe Soviet Union's plan for 1971 was its adoption of a rate of national income growthwell below the average compound rate for the five-year plan period. This seems tohave reflected two factors: the assumption of a relatively low rate of growth foragricultural output in the wake of the 1970 bumper crop; and an intention to reducethe rate of growth of industrial employment. The only other country which plannedits 1971 growth well below the five-year average rate was Poland: in this case,the main reason was probably caution on the part of the planners resulting fromuncertainty over the outcome of the policy revisions adopted early in the year.

In most cases, planned targets for the growth of gross industrial output wereon the low side of the five-year averages, though the reasons for this probablyvaried. On the other hand, apart from the case of the USSR, agricultural targetswere generally high, reflecting hopes for a recovery after the bad year in 1970.

Production

In terms of actual output performance, the year 1971, in global terms, camefairly close to what was planned. The rates of growth of national income did notdiffer substantially from plan targets and only Poland did much better thanexpected. In a sense, because of the swings in agriculture, 1971 reversed thepicture of the preceding year. The 1970 results had been characterized by anacceleration of growth in the Soviet Union but a slow-down in all the othercountries of the group, the difference being caused mainly by agricult11ral setbacksoutside the USSR. In contrast, the year 1971 brought about an acceleration ofgrowth of the net material product in all the countries of the group except forthe German Democratic Republic and the USSR, the difference again being due largelyto agricultural performance.

Table C.l. Eastern Europe and USSR: growth of nationalinccne, ~ actual and planned, 1961-1975

(Percentage)

Average annual rate Change from preceding yearGroup and country 1961-1970 1971-1975, 1970, 1971 1972,

actual planned actual Planned Actual planned

Eastern Europe . 5.7 6.7-7.0 5.6 6.9 7.3 6.6

USSR . . . 7.1 6.8 9.0 6.1 6.0 6.2

Eastern Europe and USSR 6.7 6.7-6.8 8.0 6.3 6.4 6.3

Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on national plans and plan fulfilment reports.

!y National income produced, except for the USSR where, in the case of planfigures and 1971 actual data, the reference is to national income domesticallydistributed.

~51-

As stated earlier, crop output in the USSR was lower than in the verysuccessful 1970, while the German Democratic Republic suffered a third bad year insuccession, with heavy losses in the production of fodder necessitating a crashin~ort prograIT~e. Similar losses occurred in Czechoslovakia and Poland, but wereoffset by a good grain crop.

The longer-run plans in all the countries of the group envisage increasedinterest in animal husbandry. This is largely a continuation of policies startedearlier. Both Poland and Romania made important changes of policy early in theyear, with the introduction of new price and other incentives for farmers, andthis brought about a rapid upswing in animal breeding and livestock production.Bulgaria is laying the groundwork for a rapid expansion of the pig-breeding industry.In Hungary and the USSR, livestock production continued to rise, though the increasewas less rapid than in 1970.

Hungary and Romania experienced a very satisfactory agricultural year in mostrespects. In Romania, this encouraging 1971 outcome (more than 18 per cent abovethe poor results of 1970) apparently gives some validity to the rather high five~year

target, set at 36~49 per cent over the previous five-year period (implying an annualgrowth rate of 6.3 to 8.3 per cent b/ which would otherwise seem difficult toimplement.

Table C.2. Selected countries of eastern ~)~ODe and USSR:growth of agricultural output, 1970-1971


1970, actual 1971, plan 1971, actualCountry Total Animal Total Total Aniwal

ompm Crops husbandry ompm ompm Crops husbandry

Czechoslovakia 1.3 ~3.3 5.8 4.1 2.8

Hungary -5.8 -14.3 7.6 8.0 9.0 11.0 6.0

Poland 2.2 4.3 ~l.l 4.0 3.7 1.5 6.5

Romania ~5.6 -11.5 5.3 10~11 18.2

USSR 10.3 11.8 8.6 1.8 0.0 -2.9 3.0


b/ This high target is backed by a greatly expanded programme of investmentin agriculture, which includes land improvement, irrigation, mechanization and useof chemicals. Total investment in agriCUlture is to be augmented by about 60 percent over the previous five~year period.

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Gross industrial output in 1971 grew more slowly in general than in 1970 and,on the average, than during the 1960s. As mentioned earlier, a deceleration hadbeen planned in most countries, for a variety of reasons, and the plan targetstended to be overfulfilled, except in BUlgaria, the German Democratic Republic £!and Hungary. Acute shortages of manpower, together with unresolved power supplyproblems, created substantial difficulties for the German Democratic Republic. Inother countries, power generation, machine-building (including transport equipment)and the chemical industry continued to enjoy the highest growth rates. In the USSRand possibly some other countries, consumer goods industries continued to expandsomewhat more rapidly than capital goods industries.

Table C.3. Eastern Europe and USSR: growth of industrialoutput, actual and planned, 1961-1975

(Percentage)

Average annual rate Change from preceding yearGroup and country 1961-1970, 1971~1975, 1970 1971 1972,

actual planned Planned Actual Planned Actual planned

Eastern Europe 7.8 7.5"7.8 8.2 8.4 6.7 7.4 7.0

USSR . . . . 8.5 8.0 6.3 8.5 6.9 7.8 6.9

Eastern Europeand USSR . 8.3 7.9-8.0 6.8 8.5 6.8 7.7 6.9

Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on national plans and reports of plan fulfilment,national statistical yearbooks and statistical bulletins.

The apparent rates of increase in industrial labour productivity, as measuredby the ratio of output to employment growth rates, if tended to be lower than in1970 in all countries of the region. For the group as a whole, the 1971 rate wasabout 6 per cent compared with 7 per cent in 1970. The over-all increase inindustrial employment in 1971 was about 1.6 per cent: slightly higher than in1970, and ~ in most countries ~ higher than intended. Hungary was the only countrywhere the increase in gross output was obtained with a reduced level of employment,so that the growth of productivity exceeded that of output. Czechoslovakia achieveda relatively high productivity increase on the gross measure, but material inputsare reported to have increased faster than output and accordingly value-added peremployee must have grown at a lower rate.

cf The original plans of both BUlgaria and the German Democratic RepUblicwere revised downward during the year; these revised plan targets were exceeded,by 1.6 per cent in both cases.

1 + r9J P=l+n- l

where R, ~ and ~ denote rates of growth of labour productivity, outputand employment respectively.

-53-

Use of resources

One of the general features of all the five-year plans for 1971-1975 whencompared with those for the previous five-year period is a slow-down in the rateof growth of gross investment in fixed assets. Following the rapid expansion of1970, this intended slow~down was strongly reflected in the plans for 1971 of theGerman Democratic Republic, Hungary and the USSR. A number of other countries,however (Bulgaria? Poland, Romania), planned an acceleration of investment overthe rates of 1970.

In the case of Romania, this planned acceleration was very marked, implyingperhaps less preoccupation on the part of that country 'vith the "new deal forconsumers i1

• The Polish plan, on the other hand, aimed at maintaining expansionin fixed asset investment at the expense of stock increases rather than ofconsumption.

In the course of the year, investment grew more rapidly than had been plannedalmost everywhere. Only in Romania did the increase in investment, though high(10.8 per cent), fail to reach the target; in Poland it was at the planned level.A rapid expansion of investment continued in Hungary, where the actual rate ofincrease was about twice as high as planned. The German Democratic Republicsucceeded in curbing investment only to the level of 1970, and not - as had beenplanned - below it.

In most countries, the increased investment in 1971 was also higher than theaverage increase in the 1971~1975 five-year plan. The rates of increase ininvestment were higher than those of net material product in Czechoslovakia,Hungary and the USSR, and close to them in Bulgaria and Poland. Though theavailable data do not permit an exact judgement to be made, it is probable that,in some countries at least, this caused an unintended increase in the share ofaccumulation in the national income.

Even if this were true, it would not necessarily imply a departure from themain five-year objectives, since an important and increased part of investmentdirectly serves the needs of the consumers. For example, housing constructionwas stepped up considerably in most countries as compared with previous years.

On the other hand, over-expansion of investment obviously leads to imbalances,partiCUlarly where - as is often the case - it reflects uncalled-for increases inthe volume of work in progress; the resulting delays in the completion of projectsimply higher investment costs in terms of both labour and equipment, anddifficulties in implementing market supply programmes dependent on starting upnew productive apparatus. Also, the high level of investment demand causesstrains in the market for building materials, in the labour market and in foreigntrade,

The investment plans for 1972 reveal that most countries attach greatsignificance to improving the balance of their economies in this respect, throughfurther curbs on investment. Thus, with the exception of Poland (Where, accordingto the five-year plan, the investment effort will increase to reach a peak in1973), and the German Democratic Republic (which plans only a very modest increase),the rate of increase of investment is to be slowed down. Hungary, where the

imbalance was perhaps most acute in 1971, is seeking to maintain investment at the1971 level, by using a combination of monetary and fiscal measures corresponding toits new economic mechanism: tighter credit, higher (though differentiated) interestrates, cuts in new projects financed from centralized funds etc. Certain directcontrols, such as a ban on new office buildings and holiday houses built fromenterprise funds, have also been introduced.

Difficulties over the rate of investment may create some problems of a longerterm nature. For some countries, the current slow-down would seem to imply the needto step up investment again in the later years of the five~year. period. This appearsto be the case with the German Democratic Republic, Hungary and the USSR. Bulgaria,Czechoslovakia and Poland, on the other hand, are about on an even course forachieving their five-year investment goals. Previous experience shows, however,that this may imply a certain danger of investment strains in the later years ofthe five~year period, with the emergence of new investment needs and ideas whichmay be difficult to accommodate within the available means.

At the end of March 1972, official data regarding the change in totalconsumption in 1971 are available for three countries only (Czechoslovakia,Hungary and Poland). However, information concerning retail trade, real wages andVer cavita real income makes it possible to conclude that despite the strongincrease in investment and some shifts in favour of accumulation, the rise inliving standards of the population throughout the region was considerable, andgenerally in line with the targets set in the 1971-1975 plans.

In accordance with the far-reaching changes in economic policy decided uponat the turn of 1970/71, Poland achieved especially high increases - in fact thehighest within the group - in real wages, total consumption and retail tradeturnover. This was an important reversal of the tendencies of the previous period.

In Hungary, the results of 1971 and the targets for 1972 are also somewhatabove the path implicit in the goals of the current five-year plan. In most othercountries they are more or less in line with the corresponding five-year targets,although real per capita income in the USSR tends to show a somewhat lower growthrate than that envisaged in the five-year plan.

There was a general improvement in the supply of consumer goods through retailtrade. Especially important was the change for the better in the supply of foodproducts, attributable to better harvests and increased animal production incountries which in the previous year had suffered serious agricultural setbacks.Sales of food-stuffs increased very markedly in Poland and Romania. Supplies ofpork in HunganJ attained the level set for 1975. Parallel to this improvement,the long-term shift in retail trade in favour of industrial products continued.The supply of household appliances increased substantially, and sales of passengercars to the public increased very considerably in some countries: 82 per cent inthe USSR and 66 per cent in Poland.

Foreign trade

The 1971 foreign trade of the countries in the group chiefly reflects theinfluence of domestic developments in the sphere of resource allocation, as wellas the production results of the year.

-55-

The crisis in the international monetary system does not seem to havesignificantly affected the centrally planned economies. However, the recessionarytendencies displayed by many of the developed market economies may have contributedto a slow~down of imports from the centrally planned economies; ~/ for example,Hungarian exports of rolled steel products were adversely affected, both in priceand volume.

The monetary crisis and the readjustment of exchange rates that ensuedprobably did exert some immediate but varied effects on the payments position ofsome of the countries. To the extent that the centrally planned economies had inpast years relied on United States dollars for their transactions ,,,i th the marketeconomies, there were some windfall gains resulting from the reduction of the realvalue of dollar debts. In countries which over the years had had persistent tradedeficits with western Europe, these must have been quite substantial. On theother hand, there were also some losses resulting from the depreciation of dollarreserves. It is difficult to tell what the net outcome was and it may havediffered from country to country. Increased activity by eastern European socialistcountries in western money markets in 1971 may have helped to avert or reduce thenegative effect on reserves. However, probably not all the countries were equallysuccessful. For those which were not, the loss could have been quite substantial,placing an extra constraint on purchases. For others, the situation could haveresulted in a cert~"in stimulus to imports from hard currency countries.

The devaluation of the dollar may have increased interest in importing fromthe United States. At the same time, the revaluation of the yen was probably oneof the reasons for increased Japanese interest in exporting to the eastern Europeanmarket. Though these factors may play an increasingly significant role in 1972, itis not likely that they greatly affected the pattern of foreign trade for the groupas a whole in 1971. Some relevance, however, may be attached to changes in worldprices not directly related to the monetary situation.

After four successive years of accelerating growth, the value of foreign tradeturnover, both of the eastern European centrally planned economies and of the USSR,in the first year of the new five-year plan period increased at a deceleratingrate, rnirroring in this respect the performance of world trade and conforming tothe apparent intentions of the intermediate-term development plans. As thisdecelerating expansion took place against the background of a rapid increase inworld market prices, !/ the growth rate in real terms must have been still lower.In value terms, the growth rate (for the group as a whole, though not foreastern Europe alone) was lower than that of world trade in general.

~/ See table C.ll.

f/ The world export price index seems to have increased 3-5 per cent between1970 ~nd 1971. It should be noted, however 5 that any deflation of the value datawould probably affect the trade of the centrally planned economies less than itwould world trade in general because of the relatively stable price level oftransactions among the socialist countries, which make up about 60 per cent of thetrade volume of the centrally planned economies.

Table c.4. Eastern Europe and USSR: gro¥th of foreigntrade values, 1966-1975

(Average annual rate and percentage change from preceding year)

1966-1970 1971-1975 plan, 1970 1971,Group and country total trade total trade

Exports Imports turnover Exports Imports turnover

Eastern Europe 9.0 9.7 9 12.2 14.9 10.9

USSR . . . . 9.4 7.8 5.9-6.2 9.8 13.7 6.0

Eastern Europeand USSR . . 9.2 8.9 8 11.2 14.4 8.9

Source: Data in table C.ll.

In SVite of the deceleration, both for eastern Europe and the USSR, tradeincreased at above the average rates of expansion envisaged for the five-year planperiod as a whole. This comparison raises the question whether these rates are tobe regarded as minimurn targets or as expected limits of trade growth during the planperiod. The second interpretation would carry the implication of an intendedfurther slow-down in the near future, but this is not supported by the limitedavailable data regarding 1972 plan intentions.

The basic approach adopted by most countries in their five~year plans was anacceleration of intra~trade accompanied by a deceleration of trade with nonsocialist countries. On the over-all level, the five-year targets appear toindicate a more or less pronounced slow-down in the foreign trade of Czechoslovakia,Hungary, Romania and the USSR, and unchanged rates of expansion in BUlgaria andPoland. Czechoslovakia, the German Democratic RepUblic, Hungary and the USSR areplanning to accelerate their trade within the group. In all of these cases (exceptfor the German Democratic RepUblic where this comparison is not possible), theintra~trade is to grow faster than total trade, thus implicitly faster thannon-socialist trade.

A comparison with the experience of the past decade indicates that thesetargets are intended to reverse the relationship between socialist and non-socialisttrade expansion prevailing hitherto. During the 1960s, the only country whose tradewithin the group expanded more rapidly than its non-socialist trade was Poland,which is now giving increased emphasis to its trade with the market economies.

These changes apparently reflect, on the one hand, the growing importanceattached to co-operation and specialization within the group and, on the other,caution in the setting of targets for trade with the outside world, coupled witha willingness to expand trade beyond the plan targets, depending on the SUCCesS ofexports and on the availability of suitable credit facilities.

-57-

Although the plans for 1971 reflected a slow-down in over~all trade expansion~

the target growth rates were mostly above those envisaged in the five-year plans.The same is true of the plans for 1972, as far as these are known. It seems,therefore, highly unlikely that the next years of the five~year plan period willbring significant reductions in trade targets to conform to the apparently cautiousminima adopted in the five~year plans.

In respect of the geographical breakdown, the plans for 1971, though diverse,tended to provide for a sImler growth of intra-trade than would correspond to thefive-year targets. This can be interpreted as reflecting the fact that the newprovisions for co-operation within the Council for Mutual Economic Assistance (CMEA)(see below) could be expected to bring results only in the later years of the fiveyear period. On the other hand~ some tendency to expand non-socialist traderelatively more rapidly was also visible, though not in all countries (notably notHungary, which had experienced a very high rate of growth of imports from thedeveloped market economies in 1970).

The actual 1971 performance differed in some respects from the planned patterns.Exports and imports in most cases appear to have grown at less than the plannedrates 9 with the exception of Poland on both sides of the commodity trade balance~

Hungary on the import side (though imports expanded less rapidly than in 1970), andCzechoslovakia on the export side.

Data are not yet available which would permit analysis of the breakdownbetween intra-trade and trade with the market economies in 1971. From such dataas are available for some countries, it would seem that the general decelerationof growth affected both parts of over-all trade. Soviet trade with the othersocialist countries grew more rapidly than that with countries outside the group,though very high increases were experienced in trade with some developed marketeconomies, particularly the Federal Republic of Germany. Of the other fourcountries for which the relevant data are available~ only Poland showed markedlyabove-average flows in non-socialist trade, which is in line with the policyadopted in its five-year plan, but may also reflect a rather unexpectedly successfulperformance in exports to the market economies (12.4 per cent increase in value).The latter was due largely to favourable price developments~ especially in theworld market prices for coal (in 1970, almost 60 per cent of Polish coal exportswent to market economies). On the other hand, Hungary suffered a decline in itsexports to market economies after a strong upturn in 1970, but exceeded its targetin its exports to centrally planned economies,

International co-operation policies

Many of the trade developments of 1971, as regards both intra-trade and tradewith the market economies, can probably best be interpreted in terms of the newemphasis laid by the centrally planned economies on the need to speed up theinfusion of modern technology into industry. This technological drive, aimed atdealing with one of the persistent problems of the socialist economies - that ofthe low productivity of capital - can be regarded as one of the essential featuresof the new policies. The basic solution to the problem of operationalinefficiencies, such as delays in the implementation of investment projects, ororganizational weaknesses in the supply of materials, is being sought, naturally,in various measures intended to streamline the domestic systems of management andincentives in each particular country, However, closer international co-operation

is regarded as a major precondition for success in raising the quality of industrialproducts and facilitating the expansion of exports, thus contributing to the raisingof living standards.

This closer international co~operation means, first of all, closerco-operation betvTeen the socialist countries within the existing ore;anizationalstructure (Council for Mutual Economic Assistance), which is expected to help bypromoting industrial specialization within a broad community, with the prospectivebenefits of large-scale production. This issue attracted considerable attentionduring 1971. It ,vas highlighted by the adoption of the Comprehensive Programme forthe Further Extension and Improvement of Co~operation and the Development ofSocialist Economic Integration by the CMEA Member Countries. gj The Programme,based on the principle that no supranational bodies are to be established, laysdown a large number of general and detailed guidelines and target dates for gradualimplementation over the next two decades, with an eye to the elaboration of newforms and methods of co~operation to be introduced at a later stage.

Many of these guidelines refer to the creation of new machinery and new formsof co-operation in the fields of science and technology, including tl1e expansion ofthe training of scientific personnel, and of industrial co-operation at theoperational level. The Programme also formulates measures relating to thedevelopment of closer co-operation in planning at the national level, going beyondthe previously established forms of bilateral consultation. Finally, a large partof the Programme is devoted to improvements in the machinery for intra-trade,including the price and payments systems. The objective is gradually to introducean increasingly flexible trade-and-payments system, which is to accompanysuccessfully intensified co-operation in production.

The decisions contained in the last-mentioned part of the Programme areimportant as regards mutual relations between countries in CMEA in that theyconfirm the earlier pronouncements of those countries on their intention to evolvetowards multilateralization of trade and payments. The main points are as follows:

Trade will continue to be based on state monopolies of foreign trade withcontinued use of bilateral long~term (five-year) trade agreements and annual tradeprotocols. Efforts will be made. however, towards multilateralization of paymentswithin the CMEA group through improvements in the monetary system. Theseimprovements include the raising of the "transferable roubleYi to the status of afully international currency among the socialist countries, which presupposesensuring its convertibility into the national currencies of the CMEA countries atrealistic exchange rates, and fixing its parity with gold. Efforts will be madeto transform the litransferable rouble Yi into a commonly acceptable tender of paymentand means of reserve accumulation among the CMEA countries. Eventually, itsacceptability to countries outside the group should also be ensured. Arrangementsleading to a decisive extension of the multilateral payments system among the CMEAcountries are to be implemented before the end of 1973. In the more distant future,efforts are to be made to extend this multilateral payments system so as to includecountries from outside the group. particularly other socialist countries anddeveloping countries. As part of the arrangements for the expansion of intra-trade,a category of l1non-quotal1 trade in non-essential goods has been introduced, in ,'rhich

g/ See A/C.2/272.

-59-

trading enterprises will be free to enter into contracts, without quotas in tradeagreements between countries. All countries are to promote the expansion of thispart of their trade.

The approach to international co-operation with countries outside the grouphas been largely determined by an effort to help solve the productivity problem byimporting technology from the industrially most advanced countries. The year 1971witnessed important developments in the field of industrial co-operation in theshape of a growing number of operational agreements with western firms in variousindustries, leading to the expansion of trade. Prospects for a continuation of thistrend seem to be favourable. A large number of east-west co-operative ventures,some of considerable magnitude, have recently been concluded or are at present inthe negotiating stage; various signs point to an upsurge of interest in thecentrally planned economies in obtaining technological aid from the non-socialistworld and in taking up lines of credit for this purpose. In this context, a newphenomenon - at least in respect of size and range - has been the appearance inwestern money markets of institutions controlled by individual centrally plannedeconomies or by CMEA. Through one of these, for example, Hungary successfully placeda $25-million issue of 10-year obligations in the Eurobond market at a nominal rateof 8 3/4 per cent and obtained a $50-million loan from a London banking consortiumfor a five-year period. In addition, it extended a £6~million line of commercialcredit originally negotiated late in 1970 with another United Kingdom banking group;and towards the end of 1971 the International Bank for Economic Co-operation openednegotiations in Paris for a $50~million unrestricted loan (i.e., one not tied tospecific import obligations) with a western banking group.

The socialist countries showed interest in the negotiations which led to thedecision to expand the European Economic Community to include some of the EFTAcountries, a development likeJy to create new barriers to the entry of traditionaleastern European exports, especially of agricultural commodities, into theircustomary markets. Some eastern European countries appear to have begun negotiationswith the Common Market authorities in order to counteract this threat. Thus,Romania is reported to have asked to participate in the tariff preferencesformulated for developing countries, and Poland appears to be interested innegotiating a treaty covering its cotton textile exports. Although there have beenlong~standing relationships between eastern European countries and the Brusselsauthorities, primarily in the troubled field of trade in agricultural commodities,these overtures seem to be viewed as a new departure, induced in part by theimpending centralization of the negotiations on east-west European trade treaties.

Late in 1971, Romania was admitted to membership in GATT, thus becoming thethird socialist country in this international group, Czechoslovakia being a foundingmember and Poland having been admitted in 1967. Hungary and BUlgaria participate inGATT meetings as observers, and the former country has also applied for membership.An interesting aspect of Romania's admission was that less stringent conditions wereimposed upon it than those which Poland had accepted on its accession; in particular,the requirement to raise imports from other GATT members by a fixed percentage rateannually (7 per cent in Poland i s cas e) was replaced by an agreement to raise suchimports at the same rate as total imports were to grow under the new five-year plan.In exchange, Romania obtained the agreement of other GATT countries to a gradualreduction in quantitative restrictions on Romanian exports, with 1974 as a targetdate for their complete elimination.

-60-

Some prospects for the future

Trade between the socialist countries and the developing countries increasedvery considerably during the 1960s. The total trade turnover of the USSR and thesix countries of eastern Europe with the developing countries was almost four timeshigher in 1970 than in 1960, having increased at an average rate of about 14 per centper annum. Estimates of prospects for the 1970s differ, but it is assumed by variousparties that total turnover will more than double, implying an average rate ofincrease of both exports and imports of between 7 and 8 per cent per annum. This ishardly substantiated by the target figures included in the five-year plans for1971~1975, which envisage a much slower rate of expansion. However, the newlyconcluded bilateral trade agreements with major trading partners would suggest thatthese five-year iargets will eventually be revised upwards (e.g., USSR-India tradeis to double over the next five years; the same is true of the USSR-Iran trade),reflecting particularly the growth of import demand for primary products (thoughthe new arrangements also provide for steep increases in imports of manufactures).

Though the prospects for a very rapid expansion of this trade in the comingyear or two, except in certain directions covered by specific agreements, do notseem very bright, the orientation of the plans towards consumption does provide asolid basis for a steady growth in demand for imports of most of the traditionalcommodity exports of the developing countries and for some manufactured consumergoods. The former can probably be directly related to general growth indicators,while the latter will depend on the further success of industrial co-operationagreements.

The growth indicators for 1972 confirm the generally cautious attitude towardssetting targets for the national income and for industrial output. The targets for1972 are below the rates achieved in 1971 and below the averages implied in thefive-year plans of all the countries except Hungary and the USSR. This may be areflection of caution rather than of a decision to decelerate further. In view ofthe shifts in strategy discussed earlier, as well as some related phenomena in 1971,such caution may be well advised. But it could also mean that there is an impliedexpectation that the results of the strategy changes will permit a renewedacceleration in the second half of the five-year period.

Perhaps, then, the years 1971 and 1972 may be regarded as a period ofconsolidation, preceding an expected new wave of accelerated growth. The majorfactors in this consolidation, on which further policies will have to depend, areto be sought in the development of co-operation within CMEA and in the developmentof trade with some of the industrially advanced countries leading to the increasedabsorption of new technologies and to an acceleration of the rate of industrialmodernization.

Centrally planned economies In Asia

The year 1971 was quite successful for the centrally planned economies in Asia.Despite some climatic adversities, agricultural output increased satisfactorily InChina, Mongolia and the Democratic Peoplevs Republic of Korea. The DemocraticRepublic of Viet-Nam, however, suffered from heavy floods in the autumn whichaffected the rice harvest. As a result, there was a continued need to import largequantities of rice, though efforts are being made to attain self-sufficiency byincreasing the use of high-yield varieties.

~61-

China maintained the high rates of economic growth of recent years. Selecteddata relating to the economy as a whole were officially published for the first timein more than a decade, showing a growth rate of 10 per cent for the Y1 combinedproduction of industry and agriculture". The same rate was given for the growthof industry, implying a parallel increase in the output of agriculture. Althoughbad weather in some provinces caused local setbacks in grain production, thecountry's total grain output increased by 2.5 per cent (from 240 to 246 milliontons); gj and yields per hectare reached new record levels. if Non-grain output,including livestock and poultry production, vegetables and industrial crops must,by implication, have grown very rapidly.

Agricultural development policies in China have been guided in the past fewyears by an eight-point charter which enumerates the following priority areas:soil improvement; rational application of fertilizer; water control; use ofimproved seed strains; rational close planting; plant protection; improvement offarm implements; and improved field management. In implementation of the charter,the supply of chemical fertilizer was raised in 1971 by 13 per cent, and substantialincreases were achieved in the supply of drainage and irrigation appliances,insecticides, oil for farm machinery, and farm tools. It should also be notedth~t prices raid by farmers for fertilizers, insecticides, diesel oil, keroseneand all farm machinery were substantially reduced, while those paid to farmers forsome industrial crops, such as oil~seed and sugar-cane, were increased.

According to the basic formulation of development strategy in China,agriculture is the foundation of de'Telopment, while industry is its leading sector.In the development of industry, major stress is laid on the production of iron andsteel. Very high growth rates were achieved in this respect in 1971: productionof iron ore increased by 26 per cent, that of pig iron by 23 per cent, of crudesteel by 18 per cent and of rolled steel by 15 per cent. The output of crude steelhas now reached the level of 21 million tons per annum, placing China between Franceand Italy in the list of world producers. The fact that, in contrast to thehistorical experience of other countries, the rates of increase tend to be lower athigher levels of processing is difficult to explain, though it may partly reflectthe structure of demand for intermediate products.

The production of some other basic industrial products was also increasedconsiderably: coal by 8 per cent (reaching about 300-350 million tons), crudeoil by 27.2 per cent (reaching about 25.5 million tons), chemical fertilizers by20.2 per cent (reaching nearly 17 million tons). According to official statements,in 1971 China became the world's largest producer of cotton cloth, the mainmanufactured item of popular consumption. J!

The characteristic feature of the Chinese process of industrialization is theemphasis laid on establishing small and medium-size mines and factories based onlocal supplies, in various lines of production. In 1971, about 60 per cent ofthe country's production of fertilizers and 40 per cent of cement came from such

gj The Chinese figures for grain output include a Hgrain equiva1ent Yl ofpotato production, computed by adopting a ratio of four tons of potatoes to one tonof grain.

if National targets for grain yields per hectare, exceeded in 1971, werethree tons for the north and six tons for the south.

jJ For other data, see table C.13.

-62-

local plants. Much importance is attached to factories and workshops for makingand repairing farm machinery and implements, in line with the needs of the programmefor the mechanization of agriculture.

Though little is known about the processes of investment in fixed assets, onevery important investment activity was work on extensive irrigation and waterconservancy construction in which tens of millions of peasants participated.

In the field of foreign trade, the rapid expansion of 1970 (about 10 per cent)seems to have slowed down in 1971 to a rate of 4 to 5 per cent. China's foreigntrade turnover in 1971 amounted to about $4.5-4.6 billion. Trade with China's mainpartner, Japan, which accounted for about 20 per cent of the total, increased by9.4 per cent, and reached $900 million, as against $825 million in 1970. Therewas also some increase in the trade with certain of the European centrally plannedeconomies; in the aggregate, trade with these countries approached a fourth of thetotal.

The year 1971 was highly successful for the economy of Mongolia, owing in partto a record grain crop of about 410,000 tons, i.e., some 44 per cent more than in1970, with yields increased by 27 per cent. Crop output in Mongolia accounts foronly about 15 per cent of total agricultural production, but the livestock elementwould also seem to have expanded quite satisfactorily. The livestock populationreached a total of over 22 million.

Industrial output increased by 8.5 per cent, somewhat below the plan target.Employment in industry, however, must have been reduced by an estimated 1.5 per centbelow the 1970 level, as labour productivity in industry is said to have been raisedby 10.2 per cent.

Good production results made possible the introduction of a number of measuresaimed at increasing the well-being of the population: income taxes were reduced,as well as retail prices on some consumer goods, and children's allowances paid tomothers of large families were raised. The average wage per worker increased by2.3 per cent.

The total foreign trade turnover of Mongolia increased by about 19 per centin 1971. This reflected the development of co-operation between Mongolia and thesocialist countries of the CMEA group, of which Mongolia is a member. The CMEAco-operation programrae referred to above assigns a special status to Mongolia,envisaging the introduction of a whole set of special measures to accelerate thedevelopment and increase the effectiveness of the Mongolian economy. Thesemeasures include: joint industrial projects with financial, material, technicaland manpower participation by other C~1EA countries; assistance in the absorptionof new technologies; low-interest, long-term credits; application of special priceincentives to foreign trade in respect of some agricUltural and processed products;assistance in mining and development of forest resources. Under the 1971 plan,about 45 per cent of the total fixed investment of ~1ongolia was expected to befinanced by other CMEA countries, chiefly by the USSR which provides more than90 per cent of the total fo:eign aid.

-63-

Table C.5. Eastern Europe and USSR: growth of nationalincome, ~/ actual and planned, 1961-1975

(Percentage)

Average annual rate Change from preceding yearCountry and group 1961-1970, 1971-1975, 1970, 1971 1972,

actual nlanned actual Planned Actual nlanneo

Albania . 7.5 9.2-10 6.0 12 13.4P.JBulgaria 7.7 7.7-8.5 7.0 9.0 9.4 7.7-8.5s!Czechoslovakia 4.4 5.1 5.1 5.2 5.3 5.0German Democratic Republic 4.3 4.9 5.2 4.9 4.5 4.6Hungary 5.5 5.5-6.0 4.9 7.0 7.5!JJ 5-6Poland 6.1 7.0 5·2 5.3 7.5 6.1Romania 8.4 11-12 7.1 13.9 12.5 12.0

Eastern e/ 5.7 6.7-7.0 5.6 6.9 7.3 6.6Europe- .

USSR . . . 7.1 6.8 9.0 6.1 6.0 6.2e/Eastern Europe-

and USSR 6.7 6.7-6.8 8.0 6.3 6.4 6.3


~ National income produced, except for the USSR where, in the case of allplan figures and actual data for 1971, the reference is to national incomedomestically distributed.

P.J Increment over the planned target for 1971.

s! Annual average for 1971-1975 plan.

2! The rate is given in official sources at 7-8 per cent.

~ Albania not included.

~64-

Table c.6. Eastern Europe and USSR: growth of industrialoutput, a/ actual and planned. 1961-1975

(Percentage)

Average annual rate Change from preceding yearCountry and group 1961-1970, 1911-1975, 1970 1971 1912,

actual planned Planned Actual Planned Actual planned

Albania . 10.3 10-10.5 7.5 7.7 7.5 12.5BUlgaria 11. 3 9.2-9.9 8.0 9.3 10.0 9.5 7.7Czechoslovakia 6.0 6.0-6.3 6.5 8.4 5.9 6.9German Democratic

Republic 6.2 6.0 8.4 6.4 5.6 5.4 5.5Hungary 6.9 5.7-6.0 6.0 7.2 6.0 5.0 5-6Poland 8.4 8.5 8.3 8.5 6.8 8.0 7.0Romania 12.8 11-12 11.3 12.0 9.0 11. 5

b/ 7.8 7.5-7.8 8.2 8.4 6.7 7.4 7.0Eastern Europe- .

USSR . . . . . . 8.5 8.0 6.3 8.5 6.9 7.8 6.9Eastern Europe

and USSR "E.../ 8.3 7.9-8.0 6.8 8.5 6.8 7.7 6.9

Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on national plans and plan fulfilment reports,national statistical yearbooks and statistical bulletins.

~ Gross value of output at constant prices, except in the case of theGerman Democratic Republic, where the data refer to the value of commodityproduction (i.e., gross output less work in progress), and Hungary, where thedata are based on output in physical units and other indicators.

Q/ Albania not included.

Table C.7. Eastern Europe and USSR: growth of gross value ofagricultural output, 1961-1975

(Percentage)

Averae;e annual Average annual change from

Country and group rate, 1961- preceding five~year period Change from preceding year1970, §} 1966-1970, 1971-1975, 1970, 1971 1972,

actual actual planned actual Planned Actual planned

Albania. 6.0~ 8.4-9.2 17 25.8 9.2

BUlgaria 4.0 4.7 2.3-3.7 4.5 7.1 3.1 6.0

Czechoslovakia 2.7 3.5 2.7 1.3 4.1 2.8 5.0

German DemocraticLIs.! 1.5s.!Republic 2.4 3.3 3.2

I Hungary 2.6 3.0 2.8-3.0 -5.8 8.0 9.0 2-30\Ci\D Poland 2.5 2.9 3.6-3.9 2.2 4.0 3.7 4.6

Romania 3.4 4.2 6.3-8.3 -5.6 10-11 18.2 7-8

Eastern Europe-~!/. 2.5 3.1 3.5-4.0 0.6 5.9~ 6.5~ 5.0~

USSR . . . . . . 3.3 3.9 3.7-4.0 10.3 1.8 0.0

Eastern Europe and USSR£/ 3.0 3.6 3.6-4.0 7;0 2.9~ 1.8~

Source: Centre for Development Planning, Projections and Policies of the United Nations Secretariat,based on national plans, plan fulfilment reports, and Statistical Yearbook of the Council for MutualEconomic Assistance, 1971.

~ Regression parameters from time-series (1960-1970) on simple index numbers, except for GermanDemocratic Republic.

pj 1961 to 1969.

£! Average annual compound rate.

£/ Albania not included.

~ Excluding the German Democratic Republic.

Table c.8. Selected countries of eastern Europe and USSR:labour productivity changes in industry,1966-1975 rd

(Percentage)

Average annual rate Change from preceding yearCountry 1966-1970, 1971-1975, 1970, 1971 , 1972,

actual planned actual actual planned

Bulgaria . . 6.9 7.6 7.2 6.0

Czechoslovakia 5.5 5.4-5.7 8.3 6.5

German Democratic Republic 6.2 6.2 5.0 4.5 5.0EJ

Hungary 3.6 4.5-5.0 6.2 5.3 4.5-5.5

Poland . 4.9 5.4 6.8 4.9 5.7

Romania 7.3 7.3 7.0 5.9

USSR . . 5.8 6.8 7.0 6.3 6.1

Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on national statistical reports.

~ Labour productivity is measured by the ratio between the value of grossoutput of industry and total industrial employment.

b/ Relates only to enterprises under the authority of industrial ministries.

-67-

Table C090 Selected countries of eastern Europe and USSR:changes in gross fixed investment, 1966-1975

(Percentage)

I0\coI

Country

Bulgaria 0 ..

Czechoslovakia

German Democratic Republic

Hungary

Poland.

Romania

USSR ..

Average annual Change from preceding year Average annualrate, 1966-1970 change, 1971-

1970 1971 1972, 1975, ~Planned Actual Planned Actual Planned Actual planned planned

12.3~ -2.3 0.0p..! 2.9 9.49J 6.4 6-7

8.3 4.0 6.1 4.3 7.4 5.0 6.2-605

8.2-8.7 9.7 11.4 7.4 -1. 5 000 2.0 5.2

5.7~ 804~./ 6-7 17 5-6 10 8.1-804

6.6a ! 8.3 2.8 4.3 70§:! 7.3sJ 906 7.7

10.7!::! 10.9 8.4 9.1 13.0 10.8 8.4

8.0~ 7.4~ 7.6 11. 4 5.2 7.0 5.7 7.2

£ource: Centre for Development Planning, Projections and Policies of the United NationsSecretariat, based on national plans and plan fulfilment reports, national statistical yearbooksand statistical bulletins.

~I Average annual change from preceding five-year period.

p..! Preliminary.

£! Socialist sector only.

Table C.IO. Selected countries of eastern Europe and USSR: growth of real incomes,retail trade turnover and total consumption, 1966-1975 .

(Annual average rate and percentage change from preceeding year)

A = Per capita real income

B = Real wage incOme per employed person

C = Retail trade turnover at constant prices

D = Total consumption at constant prices

1971 1972, 1971-1975,Country 1966-1970 1970 Planned Actual ·.planned planned

Bulgaria · · · · · · A 6.0 5.0 5.4 5 4.2 4.6-5.4C 8.7 8.0 6.8 6.9 5.5 6.7-7.0 ID 8.2 8 8.4-9.4~

Czechoslovakia B rt 1. 4-];a.~ 4.~1 4.# 2.5-3.03.7-38.C 6.3-

11.CP

I 5.1 5.#! 5.2~1 4.5-5.4D 5.5~ 1.~ 6 5 6.2

German Democratic4.0-4.5~1Republic · · · · · A .Jw. .,. ::nT. . "bl •• 'bl •"bl

C '-4.5 4.2=' 2.4- 3·9?1 4. Q=-'ID 4.6 4.1 3 4.~ 4.~ 4.2

Hungary · · · · · · A 6.0 6.7 5.0-5.5 5.0-6.0 5.0 4.6-4.9B 3.4 4.0 2.5-3.0 2.5-3.0 3.0 3.0-3.4C 8.9 11.5 8.5 7 7 6.0-6.4D 6.0 6.61 6 5 5

Poland • · · · · · · B 2.5 1.8 5 3.5 3.4C 6 4 8.6 7.4D 5.5 4.1 8 7.2 6.9

Romania · · · · · A 4.1 5.4 7.0-7.4B 3.7 8.1 1.5 1.8 3.5-4.2

USSR. . · · · · · A 5.8 5.4 4.7 4.5 5.2 5.6B 4.8 4.4 2.8 3.3 4.1C 8.2 7.4b! 6.4 7.0 7.7 7.2 !D 7.0 7.5- 7.~

Source: Centre for Development Planning, Projections and Policies of the United Nations Secretariat,based on national plans and plan fulfilment reports, national statistiCal yearbooks and statisticalbulletins.

~ Estimated.

£! In current prices.

-69-

Table C.ll. Selected countries of eastern Europe and USSR: growth of foreign trade value,!Y~. _·=--'::_~ ~_couiitry group, 1961-1971

(Averae;ell.n.nua,i rate and percentage:-cliangefromprecedIngyear)

Country and group1961-1965 1966-i9tqUEll:- Im- Ell:- Im-

·ports ports ports ports

1971-1975 1970 1971, planned 1971, actual 1972, planned~ ~ ~ ~ ~ ~ ~ ~ ~ ~

ports ports ports ports ports ports ports ports ports ports

18.0

BUlgaria

Total •Centrally planned

economies •Developed market

economies • • •Developing countries

Czechoslovakia

TotalCentrally planne.d


economiesDeveloping countries

15.5

13.7

21.030.2

6.9

6.5

8.46.6

13.4

9·7

24.635.0

8.0

7.8

8.77.9

11.2

11.3

8.816.9

7.1

6.1

10.1

7.4

6.6

12.21.4

10.5El 9.8

8.211.2

6.3~.6.7d/7.4-7.a:=

11.7

11.4

10.118.3

14.2

17.7

10.81.7

4.7

-0.6

2 6. oc/1 .2 0-

5.6 5.2

31.4) 10 510.8) •

8.8

8.1 9.3

11.6 11.0 8.4

7.3 10.6

2.7 4.4

German DemocraticRepublic

Total •• •Centrally planned


economies ...Developing countries

6.8 5.1,

6'i2 i 4.3I~\

7.7 6.311.8 9.6

8.3 11.5

7.9 10·9

9.4 13.49.3 9.8

10-11

10.3 17.6 16

10·912.1

8.3 31.210.9 27.2

6.0

6.dY12.5

11.2~

12.4

30.0 9.0 7.0 ~.9

4 7 'l1.,,-e/ e/2 • v- 10.<P 13.5

Hungary


economies.. ..Developed market

economies .. • ..Developing countries

11.6

11.7

10.016.3

9.5

8.2

8.9

7.4

13.64.6

10.5

9.6

12.89.2

7.0-8.5

10.<J.I11.2

6.5

22.29·4

38.2) 547.7) 2 (-}.O

( 5.4

19.3 13-l~/ 6-7£.1

20.5 13-l5~ 6-7~/

21.1) 13 5-6-2.6)

( ..( ..

9·3

12.2

18.4

8.6

6.0

7.dY4d~1

9·2

7.2

12.4

7.0

10

13.7

10.4

11.434.9

13.3 12.6

12.7 18.9

20.0 5.6-1.6 13.2

9.8

8.6.

7.516.3

10-11

5.9-6.2

8.rft.I

~ - - 'I

,~;2_"::~9. 8}?-;9:::X2~-4-5~;lr \.~;L; 9-

8.s!/ 7.6£/ 10.0 17.3

13.9 17·9 4.8~·\ 518.3 -1.5~i

7.8

6.2

12.7

10.2

11.09·1

i9·1 )\10

:(1:4)).\, -"( I

9.28.0

10.2

10·9

6.6

16.920.8

9.4

8.0

10.912.1

10.7

6.7

18.921.5

7.4

5.8

9.412.5

9.0

7.4

8.0

9·029.7

12.612.0

~Total • • •

Centrally planned"-economies • • • ~,'Developed market

economies ..Developing countries

Poland



econo'Plies .. .. ..Developing countries

~

Total ••Centrally planned


economies .. .. .. ..Developing countries

(Source and foot-notes on 'following page)

-70-

Source and foot-notes to table C.ll

Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on national statistics, plans and planfulfilment reports.

~ Growth rates are calculated from current values of exports and imports,both f.o.b. In some cases, information was available only on total trade turnover(i.e., the sum of exports and imports); these data are shown centred between therespective export and import columns.

Pi£!if£!

Cuba.

Mid-point of planned growth range, 9.9-11.2 per cent per annum.

Growth rate of total trade estimated as weighted average of components.

Refers to CMEA countries only.

Growth relatives refer to 1!socialist countries", including Yugoslavia and

!I Residual. Growth rates estimated from residually obtained value estimates.

-71-

Table C.12. Selected countries of eastern Europe and USSR: apparentincome elasticities ~ of exports and imports, 1961-1975

Country and item

Bulgaria

ExportsImports

Czechoslovakia

ExportsImports ...

German DemocraticRepublic

ExportsImports

Hungary

ExportsImports

Poland

ExportsImports

Romania

ExportsImports

USSR

Exports .Imports

19611970

1.71.4

1.61.7

1.81.9

1.91.8

1.71.5

1.21.4

1.21.1

19611965

2.32.0

3.54.0

1.91.5

2.92.4

1.81.5

1.21.4

1.21.1

19661970

1.31.0

1. 0 )

1.1 )

1.62.2

1.31.5

1.61.5

1.31.5

1.21.0

Plan 3

1971-1975

1.2-1.41. 2-1. 3

1. 2-1. 3

1. 2-1. 5

1.31.4

0.8-1. 0

0.9

1970

2.82.4

2.03.4

2.36.1

1.51.4

1.62.3

1971

1.12.4

1.91.0

1.2

1.63.9

1.82.3

1.21.2

Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on national statistics, plans and plan fulfilmentreports.

~/ Ratios of average annual rates of increase in trade at current prices toaverage annual rates of increase of net material product at constant prices.

-72-

Table C.13. China: statistical indicators of economic development, 1960-1971

(Millions of tons, except as otherwise indicated)

80.0 100.0 100.0 100.0 100.0 100.0 100.0

Product

Coal (thousands of tons)

Crude oil

Iron ore

Pig iron

Crude steel

Aluminium (thousands of tons)

1960

425

5.5

30.3

27.5

18.5

1961

250

6.2

19.3

15.0

9.5

1962

250

6.8

16.5

15.0

10.0

270

7.5

19.3

17.0

12.0

1964

290

8.5

20.4

18.0

14.0

1965

10.0

21.4

19.0

15.0

1966

327

13.0

22.0

20.0

16.0

1967

227

11.0

15.4

14.0

11.0

80'.0

1968

299

15

20.9

19.0

15.0

90.0

1969 1970 1971

277 j280L 320 300-350

14.0 20.0 25.5

27.cjJ

15.0 18.0 22.0

13.0 18.0 21.0

95.0 100-110

,d

I

Cotton cloth

Sugar ••

Chemical fertilizer

Cement

Electric power (b~11ions of kWh)

. b/Gra~n- •••••••••••••

7.6

1.3

13.5

58.5

157

1.2

8.0

155

1.3

8.0

166

1.8

10.0

170

2.0

10.5

180

2.2

11.0

188

5.9

2.4

8.5

11.0

70.0

187

2.6

11.0

196 194

7.0

2.7

9.0

13.0

65.0

202

14.0

14-16

73-75

240

16.8

246

Source: Centre for Development Planning, Projections and Policies of the United Nations Secretariat, based on EconomicCommission for Asia and the Far East, Statistical Yearbook of Asia and the Far East, 1970; China Trade Report, December 1971;Hsinhua Agency news reports.

~ Estimates based on published information on growth rates.

~ Including grain equiv~lent of the production of potatoes.

D. THE DEVELOPING COUNTRIES

For the developing countries as a group, preliminary data indicate that therate of economic growth in the first year of the Second United Nations DevelopmentDecade was 5.4 per cent. Although this was somewhat below the target rate of6 per cent, it was at least as good as the average performance in the FirstDevelopment Decade and followed immediately upon fairly high rates of growth in thetwo previous years. Moreover, it was achieved in spite of sluggish economicconditions in the developed market economies and disruptions in the internationalmonetary system. This performance should give hope of better prospects for thefuture if current efforts at self-reliance are vigorously pursued and if externalconditions improve.

The growth of industry (manufacturing and mining) reached more than 8 per centin 1971. In contrast, agricultural production increased by only 1.9 per cent, wellbelow the 3.2 per cent of the previous year and the trend rate of the 1960s, andbelow the growth of population. These domestic activities were accompanied by amoderate growth in the volume of exports and imports, about 5 and 7 per cent,respectively. In value terms, exports were up about 10 per cent, rather less thanin 1970, but far more than the average for the 1960s, while imports rose by12 per cent.

Reflecting the relatively faster rate of increase in imports as compared toexports, the developing countries recorded a larger deficit in trade balance in1971 than in 1970. However, the rise in trade deficit and in net payments ofinvestment income was more than counterbalanced by an increase in net receipts ofcapital and donations from the more advanced countries and multilateral agencies.At the beginning of 1971, moreover, the developing countries received their secondallotment of special drawing rights from the International Monetary Fund, amountingto $745 million, following the first allotment of $850 million received at thebeginning of 1970. The over-all balance of payments for the developing countriesas a group registered a surplus of $3.5 billion in 1971 as against $3 billionin 1970. The resultant net gain in international liquidity was not equallydistributed, however, and a number of countries experienced new or continuedstrains on their balance of payments.

On the whole, inflationary pressures in the developing countries tended todiminish in 1971, with over half the countries experiencing a deceleration in theirrates of inflation. Though the unweighted average rate rose to 6.9 per centcompared with 5.6 per cent in 1970, this outcome was strongly influenced by thesoaring inflation in the Khmer Republic. Similarly, the higher average rate weightedby gross domestic product - 9.4 per cent in 1971 as against 8.5 per cent in 1970 reflects the large weight attaching to the upsurge of prices in Argentina. Bothaverages conceal the fact, however, that several countries which had a history ofhyper-inflation in the previous decade continued to make progress towards the goalsof growth and price stability.

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Production

Preliminary data suggest that over-all production in 1971 slowed downfractionally from the rate achieved in 1970. The deceleration was by no meansuniform. Some countries registered an improvement in 1971, recovering from theresults of unfavourable weather experienced in preceding years (as in the case ofthe Ivory Coast, Malawi, Mauritius, Morocco, Southern Rhodesia, Syria and Tunisia)or of past disruptions of their economic life (as in the case of Indonesia, Nigeriaand Zaire). Others, in contrast, suffered frdm the vagaries of the weather(Afghanistan, Algeria, Argentina, Colombia, Kenya, Pakistan, Peru, Senegal, Uganda,United Republic of Tanzania and Uruguay) or from new or continued disturbances oftheir normal economic life (Ceylon, India, the Khmer Republic, Laos, Pakistan andthe Republic of Viet-Nam). The target growth rate of gross domestic product(6.0 per cent) was achieved in 1971 in about 40 per cent of the 84 developipgcountries for which preliminary estimates are available, while in about 14 per cent,total output failed to keep up with the increase in population. On the whole, about40 per cent of the developing countries registered an acceleration in their rate ofgrowth in 1971 while 30 per cent recorded a decleration.

Looked at by regions, there was an acceleration in west Asia, offset by aslowdown in southern and south-eastern Asia, while Africa and the western hemispheregrew at more or less the same rate as in 1970. The modest acceleration in thewest Asian countries reflected a continued high rate of growth in Iran, Israel andSaudi Arabia, while in Syria, agricultural production increased by 9 per cent asagainst a 17 per cent decline in the previous interval. The deceleration insouthern and south-eastern Asia was largely a result of the slowdown in the majorcountries, India and Pakistan. In Africa, a relatively good harvest broughtagricultural production 3.4 per cent above the 1970 level. However, there werecutbacks in output in a number of mineral-based economies. In the westernhemisphere, Brazil continued to register a remarkable growth (11.3 per cent asagainst 9.5 per cent in 1970) and this, together with a recovery recorded inChile, kept the over-all rate at about the 1970 figure in spite of some decelerationin Argentina, Colombia, Mexico and Peru.

One of the factors helping to maintain the rate of growth of total output wasan acceleration in the rate of increase in industrial production. This increasedfrom 7.6 per cent in 1970 to 8.2 per cent in 1971, above the average rate of7.4 per cent recorded in the 1960s. The acceleration was greatest among theAsian countries - from less than 8 per cent to over 10 per cent, as compared with7.6 per cent in tbe 1960s.

In the developing countries as a group, the chief increase in industrialproduction was in the manufacturing sector. Manufacturing production, which hadincreased by about 6.7 per cent a year during the First Development Decade,increased by 6.5 per cent in 1970 and by 8.4 per cent in 1971. The rate of growthdeclined from 8.6 per cent to 6.3 per cent in food manufacturing, from 8.2 per centto 6.0 per cent in non-metallic minerals and from 8.7 per cent to 8.1 per centin paper. On the other hand, growth in chemicals rose from 10 per cent to12 per cent, in basic metals from 2 per cent to more than 3 per cent, and in textilesfrom 6.4 per cent to 7.0 per cent. Mining production, which rose by an averageof 8.5 per cent a year in the 1960s, increased by about 9 per cent in 1970 and1971.

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Agricultural production

Preliminary estimates for 1971 suggest that agricultural production failed tomaintain the rate of expansion achieved in the previous year, as well as theaverage rate of the preceding decade. Yearly fluctuations in agricultural outputreveal the heavy dependence of performance on weather conditions despite progressin agricultural technology, and also point to the need for improved water supplyand the adoption of new methods of dealing with pests and diseases. Southern andsouth-eastern Asia and the western hemisphere registered a deceleration inagricultural expansion, while output in west Asia experienced a sharp recovery fromthe decline in the previous year. In Africa, the rate of growth in agricultureremained moderately above the average of the past decade. Production in theAsian countries of Afghanistan, Iran, Iraq and Pakistan was unfavourably affectedby weather conditions. India and Indonesia again enjoyed above-trend output: theexpanded utilization of high-yield varieties, fertilizer and irrigation enabledcereal production to reach a new record.

Changes in the output of agricultural raw materials tend to exert their mainimpact on trade. Among them, the output of cocoa beans and cotton increased at anabove-average rate in 1971, while wool and coffee recovered from a decline inproduction in 1970. On the other hand, jute and kenaf production declined fromthe 1970 level.

The total food production of the developing countries ~ most of which goes intodomestic consumption - increased by 1.2 per cent in 1971, well below both the rateregistered in 1970 (3.8 per cent) and the average rate recorded during the1960s (2.8 per cent). This reduction was chiefly a reflection of a decrease(0.6 per cent) in the western hemisphere, and a sharp deceleration in the growthrate in southern and south-eastern Asia from 4.3 per cent in 1970 to 1.2 per cent in1971. However, the other two regions, Africa and west Asia, showed a much betterperformance in 1971 than in 1970. West Asia, recovering from the 1970 loss,expanded its food production by more than 3 per cent. In Africa, food productionagain increased at more than the rate of population growth.

For the developing countries as a whole, per capita food production declinedby 0.9 per cent in 1971, as the modest gain of 1.0 per cent recorded by Africa wasmore than counterbalanced by a substantial reduction in the western hemisphere(2.9 per cent) and a fall in southern and south-eastern Asia (0.9 per cent).

Since the annual performance of the agricultural sector depends so heavily onthe weather, changes over a longer period are more significant than year-to-yearvariations in per capita food output. From this viewpoint, the performance of thedeveloping countries during the past decade indicates that gains made ~n Axpandingfood production were mostly offset by increases in population. As a result, theaverage growth rate of per capita food production was no more than 0.3 per cent.Although southern and south-eastern Asia, west Asia and the western hemisphereachieved modest gains in per capita food production, in Africa the level actuallydeclined.

For the developing countries as a group, an encouraging feature was thatwhereas in the first half of the 1960s there was virtually complete stagnation,per capita food production accelerated in the second half of the decade.

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Trade

The quantum of goods exported by the developing countries increased by about5 per cent in 1971. This expansion was substantially below the rate achieved inthe previous year (8.2 per cent) and short of the average of the past decade(6.5 per cent).

The slackening in 1971 was largely a reflection of demand conditions in thedeveloped market economies. The slow-down was most pronounced in the case of Africa,where a 10 per cent expGnsion in 1970 was followed by a decline in 1971, and in westAs:a, where annual growth decelerated from 12 per cent in 1970 to 3.3 per cent in1971. 1he volume of exports from southern and south-eastern Asia again grew at9 per cent, a rate well above the average of the past decade. With an expansion of11 per cent, exports from the western hemisphere grew at a much higher rate than in1970 (2.4 per cent) and the average rate of the past decade (3.7 per cent).

Export prices were substantially higher in 1971 than in 1970. The price ofprimary commodities exported from the developing countries increased by 4.6 per centin 1971 as against 2.9 per cent in 1970. This increase was brought about by aremarkable increase in mineral prices (14.4 per cent) and a moderate increase in theprices of agricultural non-food products (3.1 per cent), which more than offset aslight decline in food prices (1.7 per cent). The price of non-ferrous base metalsexported from the developing countries experienced a sharp decline (12 per cent)between 1970 and 1971. The most significant increase was in petroleum (19 per cent),reflecting the result of a series of agreements reached between August 1970 andJune 1971, which led to posted price increases by a weighted average of32.5 per cent, affecting chiefly the exports of Africa and west Asia. As a result,the average unit value of exports from west Asia was about 20 per cent above the1970 figure and from Africa about 7 per cent.

In Africa, declines in the price of cocoa, coffee and copper more or lessneutralized the increases in the price of cotton, ground-nuts, petroleum, rubberand sisal. The effect of higher export prices for palm kernel oil, palm oil, woodand wood pulp, rubber and petroleum on the unit value of exports from southernand south-eastern Asia was to a large extent offset by declines in the prices ofother major commodities from that region - coconut oil, copra, tea and tin; thus theaverage unit value of exports increased by about 3 per cent. The substantial fall(5 per cent) in the unit value of exports from the western hemisphere in 1971, onthe other hand, almost cancelled out the equally sizable gain registered in 1970.This turnabout was caused by a sharp drop in the export prices of coffee, copper,tin and wool, which more than counterbalanced increases in the export prices ofbeef, maize, petroleum, sugar and wheat.

The price index of manufactured goods entering international trade increased byabout 6 per cent between 1970 and 1971, a fractionally lower rate than in theprevious interval. This was the major factor in the continuation of the sharprise (about 4 per cent) in the unit value of imports into the developing countries.All the regions recorded a moderate acceleration in the rise of import prices,except for Africa where the rate of increase decelerated from the high figureof 8 per cent in 1970 to 4 per cent.

With export prices rising slightly more than import prices, there was afractional improvement in the terms of trade for the developing countries as a groupin 1971, though it was not big enough to make up for the loss recorded in the

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previous year. For the developing countries as a group, the outstanding featureof the First United Nations Development Decade was the relative stability of theterms of trade: after declining by about 4 per cent between 1960 and 1961, theindex moved within very narrow limits. However, this fractional improvement forthe group as a whole between 1970 and 1971 conceals large regional differences.For instance, the substantial improvement in the terms of trade for west Asia(more than 15 per cent) more than made up for the loss sustained during theprevious nine years, with the result that the region's terms of trade were muchbetter in 1971 than at the beginning of the past decade. In Africa, however, the1971 improvement in the terms of trade was equivalent to only half the lossincurred in the previous year, while in southern and south-eastern Asia, the termsof trade remained more or less unchanged between 1970 and 1971. On the other hand,in the western hemisphere, where a substantial decline in the price of exports wascombined with a continued rise in the unit value of imported goods, the terms oftrade declined sharply (about 10 per cent), to below the lowest point registeredin 1962.

The combined changes in volume and price resulted in a slight deceleration inthe growth of export earnings: the gain between 1970 and 1971 was about10 per cent, whicll compares favourably with the 7.2 per cent average of the pastdecade. The highest rate - more than twice the average rate of 10 per cent - wasrecorded in west Asia. The sharp deceleration in the growth of the exportearnings of Africa and of the western hemisphere in 1971 was caused mainly by adecline in the volume of exports from the former and a reduction in the pricesreceived by the latter. In southern and south-eastern Asia, export earningscontinued to grow at nearly twice the average rate of the past decade.

The proportion of countries earning less than in the previous year increasedmarkedly in 1971 (32 per cent as against 17 per cent in 1970). There were fewercountries achieving increases in excess of 10 per cent (35 per cent as against46 per cent) and more countries registering reductions of over 10 per cent(13 per cent as against 4 per cent).

On the import side, a modest declaration in the rate of volume expansion toabout 7 per cent was recorded. This reflected the fact that the volume of importsinto the western hemisphere and southern and south-eastern Asia, which hadincreased by almost 11 per cent and 9 per cent respectively in 1970, rose by onlyabout 7 per cent in 1971. A remarkable acceleration in the expansion of importswas experienced in Africa, where the 1971 rate of increase was twice the 1970rate and four times the average rate of the 1960s.

With import unit values generally 4 per cent higher than in 1970, expenditureon imports rose by about 12 per cent, as in 1970. There was deceleration in thegrowth of imports into the western hemisphere, while west Asia almost doubled itslow 1970 rate of expansion. Africa and the southern and south-eastern Asiancountries increased their imports at about the same rate as in 1970, while all theregions except west Asia recorded more than the average rate in the 1960s. Thoughthe proportion of countries registering increases in expenditure on imports over thepreceding year was much higher in 1971 than in 1970 - 80 per cent as against72 per cent - there were fewer countries achieving increases in excess of10 per cent (44 per cent as against 57 per cent). Of the countries registeringparticularly large increases in imports between 1970 and 1971, most (three fifths)experienced a continuation of previous high rates of growth. Most of thoseregistering a decline had experienced a major expansion in the previous year.

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Some policy developments

While significant policy changes were not always reflected in short-termtrends in production and trade, several policy developments taking place in 1971were noteworthy for their immediate impact, as well as for their long-termimplications.

A most notable development was the success of the petroleum-producing countriesin raising the price of their exports. From a stronger bargaining position thanthat enjoyed by most other primary producers, the oil-producing countries were ableto reach a series of agreements with the international oil companies which raisedposted prices by a weighted average of 32.5 per cent. Although in most cases therealized prices rose less steeply - being influenced by market conditions andsharp reductions in freight rates - the higher prices are used for tax assessmentpurposes. Thus, the dramatic rise in prices was accompanied by sharp increasesin oil revenues accruing to the host Governments. These gains varied widely, buton the average, and as the full effect of the agreements was felt, revenues went upby 52.5 per cent. Thus, for the year beginning 1 June 1971, the flow of oilrevenues to the producing countries will have increased by $4 billion. For thecalendar year 1971, the increase amounted to approximately $3.3 billion, raisingaggregate revenues of all oil-exporting developing countries from $7.6 billion to$10.9 billion. By 1975, this income could reach $40 billion if current trends indemand and cost structures prevail.

New financial resources on this scale will undoubtedly have importantimplications, both domestically and externally. Owing to limitations in absorptivecapacity in many of the countries - Algeria and Iran appear to be the only majorexceptions - it may not be possible to use all the oil revenues for domesticdevelopmental expenditure. As a result, the already large liquid internationalreserves may reach embarrassing proportions. Decisions regarding the precise formof liquid assets and currencies in the portfolio may become an increasinglyimportant factor on the international monetary scene. One possible response toan over-abundance of international reserves might be an attempt to curtailproduction and conser·ve natural resources for use over a longer period. Thisappears to be the case in one or two countries. Paradoxically, such a response, ifsufficiently widespread, would further strengthen the bargaining position of theoil producers and generate pressure for higher oil revenues .

.An alternative response would be the investment of a greater proportion ofoil revenues in new real assets rather than in liquid money market securities.Recent negotiations for participation in the ownership of the oil companies reflectssuch an approach. Algeria and Iran have already gone a long way towards acquiringnew oil industry assets by participating in refineries and pipeline distribution aswell as in the exploration and production of oil. The newly established nationaloil company of Algeria, SONATRACH, has also moved into overseas transport bypurchasing oil tankers as well as liquid gas carriers. Such penetration into thevarious phases of the oil industry could lead to the further development ofindustrial complexes based in the first instance on the processing of oil as wellas on its production and distribution. Developments in a number of otheroil-producing countries ranged from demands for majority control, as in the case ofthe Libyan Arab Republic and Nigeria, to negotiations in minority participation,as in the case of most of the Arabian Gulf countries.

The increased interest in gaining control over national resources was notlimited to the oil producers nor was it mainly for the purpose of investing

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available funds. In the Andean group of countries, a new foreign investment codeprovided for the progressive liquidation of foreign control of all industries. InChile, particularly, extensive nationalization of privately owned assets,including foreign-owned copper facilities, followed the change of Government in1970. In Pakistan, a wave of nationalization followed the cessation ofhostilities with India, although foreign investments were not primarily affected.In many other countries, although foreign investment continues to be welcome,national control of sectors regarded as highly important to economic developmentis being given new emphasis. In India, banks and insurance companies werenationalized in 1971. In Brazil, the steel, petroleum and electric energyindustries have long been under national ownership and foreign interests arepermitted to control only a small proportion of bank credit, while strictregulations govern their purchases of rural land and a high withholding tax lS

levied on dividends remitted abroad. Argentina is implementing policies to gaingreater control of two of its major industries: motor vehicles andpetro-chemicals. In 1971, the state oil company was granted exclusive rights toimport the oil needed to meet domestic demand and new petrO-Chemical plants beingset up were either to be state-owned or controlled by Argentine interests. Inthe motor vehicle industry, incentives and tax exemptions are to be granted toArgentine-controlled companies and new companies set up to manufacture automobileparts must be under Argentine-majority ownership. Similar trends are observablein a number of African countries. In Sierra Leone, for example, the Government hasgarnered a major share in the diamond mining operations and is in the process ofextending its holdings to 51 per cent participation in rutile and iron ore mining.Zambia, which has for a number of years vigorously pursued a policy of gainingmajority state participation in the major sectors of the economy and has achievedthis goal with respect to mining operations (through the state corporation MINDECO)and largely also in the industrial sector (INDECO), broadened its participation toencompass the financial sector (through FINDECO) in 1971. The transitionalphase is, however, not without its difficulties, such as those experienced inUganda where the new Government has curtailed the broad nationalization programmesbegun in 1970 because of the climate of uncertainty evidenced by the sluggish rateof new investment and the rapid outflow of capital.

In 1971 several countries achieved relatively high rates of growth through moreintensive utilization of resources. Among them were some of the larger developingcountries - notably Brazil, Indonesia and Nigeria - all of which have a considerabledevelopment potential.

Both Indonesia and Nigeria were aided by recovery from low economic activitiesand by the increased exploitation of petroleum resources. Success in controllinginflation contributed to a favourable climate for development in Brazil andIndonesia. The Brazilian approach was gradual and thus avoided the unsettlingeffect of sudden stabilization: monetary expansion was kept under control withthe assistance of open market operations introduced in 1970, and there was tightbudgetary planning, together with a sharp increase in tax revenues and strictcontrol of wage increases. In Indonesia, inflation was greatly reduced in 1969 and1970 and virtually eliminated in 1971. This was achieved by a sharp increase in thesupply of basic consumers goods. It was also greatly helped by sizable budgetarysurpluses, largely through a restructuring of the tax system and administrativeimprovements in tax collection, and rigorous limitation of spending to those areaswhich most immediately supported the stabilization endeavour, such as riceproduction which was the recipient of considerable budgetary and credit support.

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For both Brazil and Indonesia 3 1971 was a year of change in developmentpriorities. In Brazil, where recent high rates of industrial growth had reliedheavily on the utilization of idle capacity, selective expansion has been directedtowards strategic sectors such as steel, petrochemicals, shipbuilding andinfrastructures. Various measures were adopted for stimulating business andencouraging competition: they included the strengthening of the capital market, areduc~ion of industrial protection and the easing of industrial credit. A newdevelopment plan approved in 1971 3 although including large investment programmesin industry, shifted priorities away from industry into the fields of education andhealth 3 and agricultural and regional development. In Indonesia, the immediateproblem was to obtain adequate investment funds without rekindling inflation. Whilethe main effort was through fiscal policY3 the new confidence generated by theGovernment's stabilization policy encouraged the flow of private savings. Timeand savings deposits held with commercial banks rose over 70 per cent during thefirst nine months of 1971 - and this trend was further encouraged by theinstitution of a National Development Savings Scheme and an Instalment SavingsScheme introduced in the middle of the year.

The growth rate of gross domestic product in Nigeria in 1971 (9.6 per cent),was double that postulated in the second national development plan (1970-1974).This reflects the concentration in the first two years of the plan of the bulk ofreconstruction expenditures following the cessation of hostilities in early 1970.The rapid recovery was accompanied by a fairly high rate of inflation, however,partly because of sizable borrowing from the central bank to finance reconstructionactivity and partly because of the inability of the local food supply to meet thedemand. An attempt to control prices launched in mid-1970 appears to have beenlargely ineffective. The recovery was accompanied by increasing rates of industrialcapacity utilization during 1970 and 1971. In 1971 3 as a result of the increasingrevenues from oil exports, it was possible to relax the highly protectivestructure of trade restrictions and import more raw materials. This proved a majorstep towards easing the inflationary pressure, accompanied as it was by a programmeof large-scale agricultural production to bring under cultivation the unused halfof Nigeria's arable land.

With the scoring of short-term economic gains in all these countries,attention could be turned to the longer-term problem of resource utilization, witha view to avoiding the errors in the careless exploitation of natural resources thathad been characteristic of many other countries, especially in the early stages ofdevelopment.

For the vast majority of developing countries, the fundamental task ofstructural transformation is still in the beginning stages. While a number ofrecent development plans have stressed the need for such a transformation throughsuch measures as agricultural reform, the eradication of large-scale unemploymentand mass poverty, and better distribution of income, the precise steps by whichthese goals are to be attained must still be worked out as the Second DevelopmentDecade unfolds.

Outlook

In some ways the developing countries are better placed to face the futurethan they were a year ago. In the aggregate, their external liquidity stands in

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better relation to current levels of import expenditure than it did at the end ofthe First Development Decade. Internally, some success has been scored in reducingdemand pressures in a few of the countries that have serious problems of inflation.

On the other hand, the outlook for foreign exchange earnings in 1972 is rathermixed. As far as the petroleum-producing countries are concerned, the large anddependable revenues that will be assured by the great increase in petroleum pricesmake the immediate future look very encouraging. Other countries will also benefitfrom the favourable situation in these oil-producing countries through increasedtrade in goods and services (for example, Lebanon).

However, the prospects for the growth of other exports are less certain.Though the total output of the developed market economies is expected to expand ata faster rate than in 1971, because of the geographical distribution of recovery(above-trend growth in North America and below-trend growth in western Europe andJapan), the stimulus to the expansion of exports from developing countries may notbe appreciably stronger than was the case in 1971. In addition, the decision ofthe United States to impose quantitative limitations on man-made textile importshas had a severe effect on the export prospects of exporters such as Hong K011g.the Republic of Korea and Singapore, necessitating a revision of growth targetsas well as changes in investment priorities.

Recovery in the developed market economies and the agreement on new currencyrates reached in December 1971 point to stronger commodity markets, though muchdepends on 1971/72 crops. Among the commodities which enjoyed higher prices inthe early months of 1972 than in the corresponding period of 1971 were sugar,coffee and cotton and other fibres. The prospect for export earnings by exportersof these commodities is thus promising. In contrast, market prospects aredistinctly less promising for a number of other commodities, such as cocoa, rice,rubber, copper and tin.

On the Whole, there is no intrinsic reason why the developing countries shouldnot improve upon the nerformance of the recent past and move towards theattainment of the target rate of growth for the Second Development Decade.

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Table D.l. Developing countries: growth of totalproduction, 1961-1971 ~

(Percentage)

Average annual Change from preceding yearCountry group rate,1961-1970 1970 1971 E!

Developing countries total 5.1 5.8 5.4

Western hemisphere 5.2 6.8 6.5Africa . 4.4 4.5 4.5

West Asia 7.6 6.7 7.7Southern and south-eastern Asia 4.9 5.3 4.5

Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on Statistical Office of the United Nations,Monthly BUlletin of Statistics and Yearbook of National Accounts Statistics; andnational sources.

~ Measured at constant market prices.

E! Preliminary.

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Table D.2. Selected developing countries: indicated changes in gross domestic product,~ 1971

(Percentage)

Countries~ whose rates of growth were

IOJ+'I

More thantlOper cen

BrazilRepublic of

KoreaIran

Between 8.0and

9.9 per cent

NigeriaHong KongSaudi ArabiaPanamaIndonesiaSingaporeIsrael

Between 6.0and

7.9 per cent

Costa RicaTunisiaIvory CoastChileFijiAngolaLebanonPhilippinesSudanMalawiDominican

RepublicBurmaMadagascarMozambiqueEcuadorGabonMexicoParaguayVenezuelaSyriaLesothoMauritaniaSouthern

RhodesiaSwaziland

Between 5.0and

5.9 per cent

EthiopiaGuatemalaMoroccoBotswanaCameroonDahomeyUruguayMalaysiaThailandIraqKuwaitGambia

Between 3.0and

4.9 per cent

United Republicof Tanzania

El SalvadorBurundiPeruZaireGhanaEgyptBoliviaHondurasIndiaNicaraguaRepublic of

Viet-NamSierra LeoneTogoArgentinaKenyaAlgeriaSomaliaLiberiaUgandaMaliColombiaRwanda

Less than2.9

per cent

NepalSenegalCeylonChadLaosCongoNamibiaNigerUpper Volta

Negative

ZambiaAfghanistanKhmer

RepublicPakistanLibyan Arab

Republic

(Source and foot-notes on following page)

(Source and foot-notes to table D.2)

Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on data from Statistical Office of the UnitedNations, Month~y Bulletin of Statistics, Economic Commission for Asia and theFar East, IVEconomic Survey of Asia and the Far East, 1971IV (E/CN.ll/L.3ll/B),Economic Commission for Africa, IVSummaries of economic data - possible economicoutturn for 1971 for 43 countries in Africa"; United States Department ofCommerce, Foreign Economic Trends (Washington, D.C.); United States Department ofState, Agency for International Development Data Book (Washington, D.C.), andnational sources.

a/ Based on preliminary official estimates of the national accounts or"indicators IV derived from official or semi-official statistics of production,trade and transport. Where indicators were used, changes in gross domesticproduct reflect changes, in real terms, in the output of all the items of goodsand services for which data were obtainable, combined with weights derived fromnational accounts of 1970. The indicated changes are necessarily tentative, beingprepared in March 1972 and based in some cases on less than a full yearYs figurefor some of the components of the gross domestic product.

£! Countries are arranged in descending order of rates of growth.

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Table D.3. Selected developing countries: growth of agriculturalproduction, 1961-1971

(Percentage)

Group and country Average annual rate Change from preceding year1961-1965 1965-19'70 ' 1961-1970 1971 1971 §:/

Western hemisphereArgentina 2.5 1.9 2.2 -4.6 -3.2Bolivia 4.0 1.9 3.0 1.4 2.3Brazil 4.1 1.0 2.5 1.7 4.8Chile 1.2 3.0 2.1 4.5 4.3Colombia 2.4 2.3 2.4Costa Rica 4.4 7.3 5.9 8.0 6.1Cuba 0.1 4.5 2.3 32.3 -21.3Dominican Republic -3.8 4.7 0.5 6.8 4.5Ecuador 6.9 7.2 4.6 4.7Guatemala 6.7 1.8 4.2 2.7 -1.4Honduras 6.2 2.7 4.5 5.2 3.5Mexico 5.4 1.6 3.5 2.1 1.5Panama 4.2 4.5 4.4 -4.7 3.8Paraguay 5.4 1.9 3.7 2.7 0.7Peru 2.2 2.4 2.3 4.6 3.2Uruguay 3.0 -0.6 1.2 1.9Venezuela 5.5 4.7 5.2 4.7 2.5

AfricaAlgeria -1. 7 1.2 -0.3 7.4 3.1Egypt 2.4 2.7 2.6 -0.6 4.5Ethiopia 2.8 2.7 2.8 2.6 1.3Libyan Arab Republic 9.4 0.3 4.8 -1.4 12.4Morocco 2.8 2.6 2.7 6.6 7.9Soutli Africa 1.8 4.0 2.9 -0.6 9.2Sudan 3.7 5.4 4.6 2.4 1.9Tunisia 1.9 1.6 1.8 22.7 14.7

West AsiaIran 3.8 2.2 3.0 -0.6 -2.3Iraq 3.1 3.4 3.3 -10.2 -7.3Israel 7.3 4.9 6.1. 2.1 3.2Syria 8.7 -3.8 2.. 4 -16.6 9.0

Southern andsouth-eastern AsiaAfghanistan 1.1 1.3 1.2 ·-2.9 -5.9Burma 2.1 1.8 2.0 3.4 0.7Ceylon 3.5 2.1 2.8 3.8India 0.4 4.3 2.3 4.7 3.3Indonesia 1.3 3.0 2.2 7.2 2.8

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Group and country

Table D.3 (continued)

Average annual rate1961-1965 1965-1970 1961-1970

Change from preceding year19'71 1971 ~

Southern andsouth-east ern Asia(continued)Malaysia 4.2 6.1 5.2 3.4 8.0Pakistan 2.8 3.8 3.3 0.6 -4.9Philippines 3.3 2.5 2.9 2.4 3.5Republic of Korea 6.5 1.0 3.7 3.0Thailand 6.6 3.4 5.0 2.7 3.9

Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on Food and Agriculture Organization of theUnited Nations, Monthly,Bulletin of Agricultural Economics and Statistics (Rome),and national sources.

~ Preliminary.

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Table D.4. Selected developing countries: changes in foodproduction, 1961-1971

Percentage change from

Group and country Average annual rate -preceding year1961-1965 1965-1970 1961-1970 1971 1971 ~

Western hemis-phere 3.7 3.2 3.4 4.8 -0.6Argentina 2.7 2.1 2.4 -6.0 -2.4Bolivia 3.7 1.4 2.6 0.9 1.9Brazil 5.1 3.4 4.2 7.0 1.5Chile 1.2 2.1 1.7 5.2 4.3

Colombia 3.1 3.8 3.4 4.2 4.6Costa Rica 5.4 7.4 6.4 9.3 7.5Cuba 0.6 4.5 2.5 33.5 -22.2Dominican Republic -4.0 5.2 0.6 7.9 5.6Ecuador 6.3 1.5 3.9 3.1 -0.4

Guatemala 3.5 3.8 3.6 1.6 4.1Honduras 5.0 4.2 4.6 7.3 4.0Mexico 5.6 3.5 4.5 3.7 0.5Panama 4.3 4.7 4.5 -4.2 3.3Paraguay 4.1 2.1 3.1 2.7 5.7

Peru 2.5 3.4 3.0 6.3 2.5Uruguay 4.3 0.3 2.3 1.7 4.2Venezuela 6.0 5.1 5.5' 5.2 2.7

Africa 1.6 2.2 1.9 2.8 3.4Algeria -1.8 0.9 -0.5 7.5 3.1Egypt 2.9 3.3 3.1 0.6 4.9Ethiopia 2.3 2.1 2.2 2.8 1.4Libyan Arab Republic 9.5 -0.3 4.6 -3.2 13.3

Morocco 2.8 2.5 2.7 6.5 8.9Sudan 4.1 4.9 4.5 2.1 2.9Tunisia -2.1 1.6 -0.2 24.2 14.7

West Asia 2.8 2.5 2.7 -0.6 3.0-----Iran 3.1 2.5 2.8 -0.6 -1.2Iraq 5.4 1.7 3.6 -11.4 -8.1Israel 6.8 4.5 5.9 3.6 3.5Syria 8.5 -4.1 2.2 -23.8 13.2

-88-



Group and country Averap:e annual rate preceding year1961-1965 1965-1970 1961-1970 1971 1971 §./

Southern andsouth-eastern Asia 2.0 3.7 2.8 4.3 1.2Afghanistan 0.8 1.1 0.9 -2.9 -6.1Burma 2.1 1.5 1.8 2.7 2.0Ceylon 3.9 3.4 3.6 7.4 -1.1India 0.3 4.1 2.2 5.3 2.6Indonesia 1.1 3.2 2.1 7.7 3.4

Malaysia 4.6 5.3 4.9 6.7 8.5Pakistan 2.5 3.9 3.2 1.2 -3.6Philippines 3.5 2.3 2.9 1.8 4.1Republic of Korea 6.3 1.5 3.9 -1.0 3.1Thailand 6.3 3.8 5.1 4.3 3.6

Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on Food and Agriculture Organization of the UnitedNations, Monthly Bulletin of Agricultural Economics and Statistics, and nationalsources.

§./ Preliminary.

-89-

Table D.5. Selected developing countries: changes in per capitafood production, 1961-1971


Group and country Average annual rate preceding year1961-1965 1965-1970 1961-1970 1971 1971 §!

Western hemisphere 1.0 0.2 0.6 1.0 -2.9Argentina 1.3 0.6 1.0 -7.7 -3.1Bolivia 1.3 -1.1 0.1 -2.1 -0.7Brazil 2.2 -0.7 1.4 4.0 -1.6Chile -1.2 -0.6 3.3 2.2Colombia 0.6 0.3 1.0 2.0

Costa Rica 1.9 3.9 2.9 6.6 3.6Cuba -1. 5 3.0 0.7 31.9 -23.9Dominican Republic -7.5 2.1 2.7 4.6 1.1Ecuador 3.1 -1.8 0.7 0.7 -3.7Guatemala 0.7 1.0 0.8 -0.8 1.7

Honduras 1.9 1.0 1.5 4.4Mexico 2.5 0.2 1.3 -3.1Panama 1.2 1.6 1.4 -7.4Paraguay 1.1 -0.8 0.2 2.0Peru -0.6 0.6 3.0 -1.0

Uruguay 3.0 -0.8 1.1 1.1 3.1Venezuela 2.6 1.8 2.2 1.4 -0.7

Africa -0.8 -0.4 --0.6 1.0Algeria -3.5 -1. 5 -2.5 4.6Egypt -0.5 1.1 0.8 -1. 7 1.7Ethiopia -0.6 -0.2 0.2Libyan Arab Republic 6.2 -3.5 1.4 -6.3 10.5

Morocco 0.5 0.3 4.1 5.8Sudan 1.3 2.4 1.8 -0.8Tunisia -3.4 -1.0 -2.4 18.5 13.2

West Asia 0.2 0.2 0.2 -2.8Iran 0.5 -0.4 0.1 -2.8 -3.8Iraq 2.2 -1. 4 0.4 -14.6 -11.4Israel 3.3 2.2 2.7 1.1 1.1Syria 6.3 -6.8 -0.2 -27.1 10.3

~90-



Group and country Average annual rate preceding year1961-1965 1965-1970 1961-1970 1971 1971 ~

Southern andsouth-eastern Asia -0.6 1.1 0.3 1.8 -0.9Afghanistan -0.9 -1.4 -1.2 -6.8 -0.8Burma -0.5 -0.3Ceylon 1.6 1.2 1.4 5.0 -3.4India -2.1 1.8 -0.2 2.9

Indonesia -1.2 0.8 -0.2 5.1 1.0Malaysia 0.7 2.5 2.1 3.6 5.4Pakistan -0.4 1.0 0.3 -1.9 -6.7Philippines 0.2 -1.0 -0.4 -2.0 1.0Republic of Korea 3.9 -0.9 1.5 -3.1Thailand 3.4 1.0 2.2 -0.8 0.8

Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on Food and Agriculture Organization of theUnited Nations, Monthly Bulletin of Agricultural Economics and Statistics, andnational sources.

~ Preliminary.

-91-

Table D.6. Developing countries: changes in terms of trade, 1969-1971


Country, group and item

Western hemisphere

Unit value:Exports .Imports .

Terms of trade

Africa


Terms of trade

West Asia


Terms of trade

Southern and south-eastern Asia


Terms of trade

Developing countries, total


Terms of trade

1969

2.81.90.9

4.51.03.6

4.9-4.6

6.23.13.0

2.92.9

1970

5.54.60.9

0.97.6

-6.3

2.8-2.7

2.92.00.9

2.83.8

-0.9

1971!Y

-5.05.3

-10.0

7.03.73.1

20.0

2.82.9

4.43.90.3

Source: Centre for Development Planning Projections and Policies of theUnited Nations Secretariat, based on Statistical Office of the United Nation~,

Monthly Bulletin of Statistics, and other sources.

~/ Preliminary, based in most cases on less than 12 months' coverage.

-92-

Table D.7. Selected developing countries: changes inconsumer prices, 1961-1971

Countr~/Average annual rate

of increase,1961-1969 pj

Percentage change from precedingyear

1970 1971 £!

A. Countries whose rate of inflation was less than 5 per cent in 1971

1. Experiencing a decelerating rate of inflation

Ivory CoastEthiopiaSierra LeoneIndonesiaHong Kong

CeylonSudanLibyan Arab RepublicHondurasJordan

CameroonSurinamDominican RepublicSomaliaGuatemala

IndiaMexicoCosta RicaGuyanaMauritius

PanamaBoliviaGabonIraqEl Salvador

PakistanChina

3.34.43.7

15.62.1

2.63.46.12.54.7

3.74.21.54.80.7

6.42.42.22.11.8

1.01.73.41.90.4

3.33.3

8.610.2

7.612.3

7.6

5.94.1

2.86.8

5.72.65.20.62.4

5.15.14.73.41.5

3.04.14.34.42.9

5.43.5

-2.90.3

-2.32.53.1

2.71.3

-2.70.24.3

3.30.23.0

-1.30.6

3.33.33.02.10.3

1.83.03.43.61.2

4.72.9

2. Experiencing a fairly steady rate of inflation

Ghana 8.3 2.4 2.0Netherlands Antilles 1.3 3.6 3.2Liberia 5.3 0.7 0.2Kenya 1.8 2.3 2.1Egypt 3.2 3.8 3.7

Malaysia 0.7 1.3 1.5Venezuela 1.6 2.1 2.6Zaire 21.9 3.3 3.8

-';;1:)-

Table D,7 (continued)

Country.§:/Average annual rate

of increase1961-1969 "'£./


1970 1971 £!

3. Experiencing an accelerating rate of inflation

Senegal 2,6 2.2 2.8United Republic of

Tanzania 2,0 3.0 3.7Trinidad and Tobago 3.1 2.6 3.5Laos 23,0 0.3 1.3Southern Rhodesia 2.1 2,1 3.1

Thailand 2,2 0.8 2.0Lebanon 2.5 1.6Singapo.ce 1.2 0.3 1.9Iran 1.8 1.7 4.1Congo 4,4 1.5 4.0Morocco 2.4 1.3 4.2Burundi 7,3 -0.2 3,9

B, Countries whose rate of inflation was more than 5 per cent in 1971

1. Experiencing a decelerating rate of inflation

Republic of Viet-Nam 19.3 36,6 18.3Chile 26,0 32,3 20,1Chad 4.4 8,9 6,0Jamaica 3,5 9.8 6.9Malawi 5.1 9.5 8.1

2. Experiencing a fairly steady rate of inflation

RepUblic of Korea 13.6 15.6 15.2Barbados 5,5 7.8 7,5Mauritania 4,6 6.6 6,6

3. Experiencing an accelerating rate of inflation

Peru 10.0 5,0 6.9J3razil 47.0 19.1 21.1Colombia 9,6 6.8 9.1Fiji 2,6 4,1 6.5Syrian Arab Republic 2,4 4,2 6,6

Madagascar 2,6 2.9 5.4Zambia 4,4 2,6 5,9Ecuador 4.2 5.2 9.4Tunisia 3,0 1.0 5,9

-94-


Country~Average annual rate

of increase1961~1969 9../


1970 1971 £/

3. Experiencing an accelerating rate of inflation (continued)

Israel 5.5 6.1 12.0Paraguay 2.2 -0.9 5.0Uganda 3.9 9.8 16.7Uruguay 44.2 16.4 23.9Philippines 4.0 11.0 19.0

Haiti 2.9 0.7 9.5Mozambique 2.7 4.7 14.3Argentina 22.0 13.4 32.1Khmer Republic 3.6 11.9 72.0

Source: Centre for Development Planning. Projections and Policies of theUnited Nations Secretariat. based on Statistical Office of the United Nations,Monthly Bulletin of Statistics.

a/ Countries are arranged in descending order of deceleration which isdefined as an absolute difference between the rate of inflation in 1970 and that in1971.

£/ 1961-1969 for Cameroon;1962-1969 for Niger;1964-1969 for Libyan Arab Republic, ~1adagascar, Paraguay and Zaire;1965-1969 for Burundi and Gabon;1966-1969 for Lebanon.

s! Preliminary.

-95-

Table D.8. Developing countries: balance of trade andchanges in international liquidity, 1969-1971

(tlillions of dollars)

Balance of trade~1 Net change in reserves!:.!Country group

1969 19710 1969 197101970 1970

D l' t' dl -1,288 -1,370 -2,635 1,455 2,628 4,509eve 0plng coun ~les- 0 0 · ·Oil-producing countries~ 5,585 6,357 8,822 311 740 3,356Other developing countries -6,873 -7,727 -11,457 1,144 1,888 1,153

Selected (developing)countries: !/

Western hemisphere -91 -496 -3,669 560 1,175 865Venezuela. . 704 662 992 11 88 501Rest of Latin America !!J 0 -795 -1,158 -4,324 549 1,087 364

Africa 0 . · . 2,179 1,966 1,261 562 1,097 1,294Africa oil region ~I 1,612 1,745 2,065 309 687 1,418Rest of Africa il · 567 221 -441 253 410 -124

\vest Asia 0 0 . . 1,915 2,538 4,219 -272 31 1,855West Asia oil region 11 · 3,269 3,950 5,765 -9 -35 1,437Rest of West Asia ~. · -1,354 -1,412 -1,546 -263 66 418

Southern and south-easternAsia !/ 0 0 · . · · -3,531 -3,564 -3,933 615 355 380

Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on International Monetary Fund, InternationalFinancial Statistics (\vashington, D.C.), March 1972; Statistical Office of theUnited Nations, Monthly Bulletin of Statistics, March 1972, and national sources.

~I Exports, foo.b. minus imports, c.i.fo

~I Gold, SDR, convertible foreign exchange and reserve positions in theInternational Monetary Fund.

for

::=./il

lack

Preliminary.

Including estimates for countries omitted from the regional subgroupingof adequate data.

~ Africa oil region, west Asia oil region and Venezuela.

II Selected on the basis of availability of information regarding reserves.

£1 Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic,Ecuador, El Salvador, Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Nicaragua,Panama, Paraguay, Peru, Trinidad and Tobago and Uruguay.

(Foot-notes continued on following page)

-96-

(Foot-notes to table D.8) (continued):

£/ Algeria, Libyan Arab Republic and Nigeria.

iJ Burundi, Cameroon, Central African Republic, Chad, Dahomey, Egypt,Ethiopia, Gabon, Ghana, Ivory Coast, Kenya, Madagascar, Mali, Mauritania, Morocco,Niger, Congo, Rwanda, Senegal, Sierra Leone, Sudan, Togo, Tunisia, Uganda, UnitedRepublic of Tanzania, Upper Volta, Zaire and Zambia; and special drawing rightsand reserve positions only of all other IMF member countries in Africa.

jJ Iran, Iraq, Kuwait and Saudi Arabia.

k/ Israel, Jordan, Lebanon, People's Democratic Republic of Yemen and SYria.

!I Afghanistan, Burma, Ceylon, India, Indonesia, Malaysia, Nepal, Pakistan.Philippines, Republic of Korea, Republic of Viet~Nam, Singapore, Thailand; andIMF special drawing rights and reserve positions only of the Khmer Republic andLaos.

Table D.9. Selected developing countries: changes ininternational liquidity, 1961-1971


International reserves,£!end 1971

International reserves,£/ endof year, as percentage of

As percentageof reserves atGroup and country.§} Millions

ofdollars End

1970End /1960~

Gross domesticproduct in b

preceding year-l

1961 1971

Imports inpreceding

year i/

1961 1971

27 4352 47519 1445 2242 44

AfricaTotal .

CameroonCentral African

RepublicChadCongoDahomey

Egypt .EthiopiaGabonGhanaIvory Coast

KenyaLibyan Arab RepublicMauritaniaMoroccoNiger .

NigeriaSenegalSudan ..TogoTunisia

UgandaUnited Republic of

TanzaniaUpper VoltaZaire .Zambia

4,754

74

2101122

18468215779

1702,633

71526

432362837

144

47

6040

153264

111

91

121430124142

11096

1439875

77166206106137

193164127105248

83

92110

8351

206

17092

220244

70128210

15231

333,211

11072

321

1004717

530171

96

98334

41132

9.4

3.9

4.42.75.8

4.95.98.6

14.36.0

6.734.87.7

10.33.9

11. 712.913.7

6.19.2

11.2

11.36.51.3

27.2

11.9

7.6

0.94.54.8

10.0

2.43.86.32.25.3

11.075.13.44.59.0

8.94.51.6

13.911.4

4.0

4.716.4

7.615.0

47

24

324

36

3066345320

6549842738

66

55435281

59

30

351817

4

2340261420

4119105747

39

22862847

Source: Centre for Development Planning, Projections and Policies of theUnited Nations Secretariat, based on International Monetary Fund, InternationalFinancial Statistics, Statistical Office of the United Nations, Yearbook of NationalAccounts Statistics, and national sources.

(Foot-notes on following page)

-99~

(Foot-notes to table D.9)

~/ The list represents all the countries for which relevant data areavailable.

"E./

c/position

In current market prices converted at official exchange rates.

Gold, convertible foreign exchange, special drawing rights and reservein the International Monetary Fund.

~ Valued c.i.f.

~/ 1962 for Dahomey, Iran, Ivory Coast, Kenya, Mauritania, Niger, Senegal,Togo, Uganda, United RepUblic of Tanzania and Upper Volta; 1964 for Zaire, and1965 for Zambia.

~lOO-

Table D.10. Major oil-producing developing countries: oil production andgovernment oil revenue, 1971

Output Ratio of oil / Government Negotiated price External ForeignCountry (tons) sector to GDP~ oil revenue increase, 1971 reserves assets

(percentage) (millions of (percentage)~

At end of(dollars) September 1971

(millions of dollars)

Algeria . 47,253E..! 18.0 320 35.8 432 391

Indonesia 44,000 9.2 337 174

Iran . · 227,000 13.9 1,076EJ 26.8 327 341

Iraq 83,000 45.8 924 42.5 522 514

Kuwait · 145,000 57.0 8nE..! 23.8 267 1,261

i Libyan Arab RepUblic 159,201b/58.6 1,295£/ 54.2 2,483 2,494I-'

0322£./I-' Nigeria . 74,000 11.8 31.2 249 333I .

Saudi Arabia · 222,000 40.0 1,200£'/ 37.0 1,237 1,260

Venezuela . 184,000 20.0 1,406E..! 23.1 1,401 1,290

Source: Centre for Development Planning, ~rojections and Policies of the United NationsSecretariat, based on Statistical Office of the United Nations, Yearbook of National Accounts Statistics;International Monetary Fund, International Financial Statistics (Washington, D.C.), March 1972;and Petroleum Press Service (London), several issues.

~/ Latest year available.

"E./ 1970.

£./ Fiscal year, 1970/71.

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